Business ideas

“The golden rule in making a successful exit is to plan the strategy early and obtain professional help, including taxation advice,” said Carey.

For most business owners, selling is the most common exit option. Businesses with assets, such as property, are sold based on asset valuations or the value of the rent arising from them. Trading concerns normally are sold based on a multiple of profits.

Among the most likely buyers are the management team or an outside investor looking to diversify. A trade sale to a supplier, customer or a competitor can be the most lucrative, however.

“The last often pays the best price because they can be more assured of continuity and have the confidence to pay the price,” said Carey. “A competitor will also be removing part of their competition.”

Sellers, however, need to be realistic about the price. “Many companies are lifestyle businesses that do not make a significant profit, but do provide a good lifestyle for the owners,” said Carey, adding that vendors set a price based on how much money they want, rather than the actual value of the business.

This strategy is guaranteed to fail. “What happens then is that the vendor ends up staying longer in the business, until their reliance on the cash from the exit reduces,” he said.

There are other exit variations too. “An exit can be financed by way of selling the trade and retaining an asset, such as property or patent, and renting this back to the purchasers,” said Carey. “Building up a pension scheme when you are operating the business will also reduce your dependency on achieving a large exit price.”

Eamonn Porter recently sold his double-glazing and sign-writing equipment distribution business in order to retire early. Selling the business he had established 15 years before was more emotional than he expected.

“It’s that great chasm between thinking about setting up a business and actually doing it,” he said. “Once you’ve done it, it’s hard to let it go.”

Though he achieved his asking price, money wasn’t the only factor when deciding to whom to sell.

“You spend a lot of time in the early years waiting for the phone to ring and when it does, you are eternally grateful to those people who bothered to ring you,” said Porter. “It was important to me that my customers were looked after properly so, as part of the deal, I am staying on for a few months to help with the handover.”

Anyone considering selling should also consider tying in employees that are vital to the running of the business with some form of golden handcuff deal, said Michael Neary, a corporate finance director with Grant Thornton.

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