Business News

What business owners should consider regarding succession planning and business exit strategies

Exiting a business is a monumental event in the life of an entrepreneur. It is a process that requires meticulous planning and execution to ensure a smooth transition.

A recent report found that many business owners are looking to the future with 23 per cent asked stated that they are fast-tracking their plans to either sell or close their enterprises in the coming year.

The main driving force behind this trend is the current political climate. With a General Election expected in the next 15 months and Labour leading significantly in the polls, the possibility of a Government shift and ensuing alterations to the tax system is the primary concern.

Choosing the right exit strategy

Before you even begin to think about leaving your business, it’s imperative to identify the most fitting exit strategy. The common routes include:

Selling the business

This is often the most straightforward way to exit, but it requires a well-valued business to attract buyers.


Whether to family members or employees, this strategy keeps the business within a trusted circle but can have complex emotional and financial implications.

Closing down

Sometimes, winding up the business is the most sensible option, particularly if it’s not profitable or if there’s no successor in sight.

Each of these strategies comes with its own set of implications, including tax consequences. Therefore, consulting our experts at TWP to discuss your options in detail is highly advisable.

Business valuation

One of the cornerstones of a successful business exit is an accurate valuation. A thorough business valuation considers various factors, including:

  • Financial performance
  • Assets
  • Intellectual property
  • Market conditions
  • Future growth prospects

We can offer you an impartial assessment, setting a realistic asking price if you’re selling or aiding in a fair transfer of ownership.

Tax implications

Exiting a business isn’t just a matter of handing over the keys; it has several tax considerations that can significantly affect your financial standing. Key taxes to consider include:

  • Capital Gains Tax (CGT)
  • Inheritance Tax (IHT
  • Stamp duty

Understanding these tax implications is crucial for maximising your financial gains from the exit.

Financial statements and record-keeping

Before you exit, ensuring that your financial statements are both accurate and current is essential. This involves:

  • Organising all financial records
  • Reconciling accounts
  • Preparing financial statements

Accurate financial documentation not only instils confidence in potential buyers or transferees but also facilitates a smoother transition.

Employee welfare

If your business has employees, their well-being should be a priority during the exit process. Key considerations include:

  • Transparent communication about the exit
  • Compliance with employment legislation, such as redundancy obligations
  • Failure to consider the impact on employees could lead to legal repercussions

Contractual obligations

Before making your exit, it’s crucial to review all contractual obligations your business may have. This includes agreements with:

  • Suppliers
  • Customers
  • Landlords

Understanding these obligations will enable you to plan your exit strategy more effectively, ensuring a smooth transition for all parties involved.

Exiting a business is a complex process that requires careful planning and execution. From choosing the right exit strategy and valuing your business to understanding tax implications and fulfilling contractual obligations, each step is crucial for a successful transition.

Click here to read our full succession planning guide.

If you are planning on succession or exit strategies for your business, please contact our team of experts for tailored advice.