Why business owners need an exit plan

We discuss the importance of early planning and what to consider.

Thinking of selling your business?

A common pitfall for business owners is leaving exit planning too late. We discuss the importance of early planning and what you should consider now to protect your wealth.

Why business owners need an exit plan

When you’re caught up in the day-to-day of running a business, it’s easy to put off thinking about how you’ll eventually leave it. But every business owner exits at some point – whether it’s by choice, retirement or unexpected illness, which could mean selling the business.

A common pitfall for business owners is leaving exit planning too late. Early planning gives you greater control over your timeline, your terms and your financial outcome.

What is exit planning?

Exit planning is more than just selling your business. It’s about having a clear strategy for stepping away in a way that protects your future wealth. This could mean selling the business, passing it to a family member or key employee, or closing it down as tax-efficiently as possible.

If you don’t have a plan, you could end up paying unnecessary tax bills, making last-minute decisions and possibly getting far less than your business is worth.

Is your business sale-ready?

Many business owners think that they’ll make a packet when they eventually sell the business only to find it’s not worth as much as they thought. However, there are things you can do now to add value to your business.

Making sure your business is profitable and has robust systems, good financial records and a stable customer base all add to business value. On the other hand, if your business can’t run without you, or if your accounts aren’t up to date, it will be harder to sell and command a good price.

If selling is your long-term goal, the groundwork needs to begin well before you’re ready to exit. That means getting your business into the best possible shape now.

Don’t let tax eat into your profits

Tax planning is a key part of exit planning. Without the right advice, you could lose a significant portion of your payout.

For example, Business Asset Disposal Relief could enable you to pay just 10% Capital Gains Tax on the sale, but only if you meet the qualifying criteria. Structuring pension contributions in advance can also help minimise tax and guarantee future wealth. And if you’re closing the company, you may be able to withdraw profits as capital rather than income, further lowering your tax bill.

The right planning can make a big difference to what you keep when you walk away.

Planning for the unexpected

Not all exits are planned. Health or personal issues, or economic reasons can push you to leave the business sooner than you’d planned. Having safeguards in place can protect both your finances and your team.

Consider agreements with shareholders or partners that set out what happens if one person steps away. Key person insurance can keep the business afloat if you’re suddenly unable to work. And having a Power of Attorney will make sure that someone can help if you’re unable to make decisions yourself.

These protections mean your business, team members and family aren’t left in a difficult position if something happens to you unexpectedly.

If you’d like to avoid other common financial pitfalls and keep more of your hard-earned cash, download our free guide:

To find out how we can help your business, please get in touch on 01603 812131 or email enquire@swintonaccountants.co.uk