Planning Your Business Exit Strategy

Selling Your Business (or Your Stake in the Business)

Selling your business, or a portion of it, needs careful consideration across a number of extremely important areas. It could prove beneficial using the services of professionals to handle these tasks which include:

• Business valuation
• Sale negotiation
• Contract preparation
• Handling legal and tax obligations

Through this process it’s wise to anticipate queries from prospective purchasers and be prepared with responses.

You will need to consider your business structure, if there’s any entities or assets you wish to keep, and be aware of any GST, CGT or stamp duty implications, including whether you are eligible to apply any discounts or concessions (such as the small business CGT concessions). You can read more about the tips and traps of selling your business.

If you have other partners or shareholders in the business, then you may only wish to sell your stake in the business – either to one of your business partners, or a third party. In such cases, it is vital to have a clear agreement with the other stakeholders regarding the sale of your stake in the business. Things like including valuation methodology, the process and timelines, and any restrictions on selling your shares may be covered in a shareholders agreement, otherwise they will need to be discussed and agreed at the time.

Succession Planning

Succession planning will be a crucial component of your exit strategy if you want your business to continue after you retire. The earlier you prepare a succession plan, the better for everyone involved. This can range from developing the skills of your team, particularly those you may want to take over, to structuring your retirement assets to minimise your tax liabilities and even asset protection. These measures take time to put in place, so forward planning is critical.

As you get closer to the exit stage you will also need a strategy for managing the handover to the new business owner, to ensure a smooth transition. This may include things like reviewing the current business structure, ensuring the business is adequately staffed and resourced, reviewing operational procedures, and ensuring all processes are documented.

It will be important to pass on your many years of accumulated knowledge and skills, and make sure your staff, customers, suppliers and other stakeholders feel comfortable and confident dealing with the new owner. You will also want to make sure that your personal assets are protected in the event that the new business owner faces any legal or financial issues.

Read more about succession planning.

Closing or Dissolving the Business

Simply terminating the business operations or dissolving your company might be best in some circumstances. When the business is no longer profitable, or the business is intrinsically linked with you personally and unable to be sold, this may be the simplest course of action.

Depending on the structure of your business, it may be as simple as ceasing your registrations with the ATO and closing your business bank accounts. If you have a company or trust as part of your business structure, you’ll need to make sure you’ve cleared all company/trust liabilities, paid out any retained earnings and lodged a final tax return. Then you can apply to ASIC to have them de-register the company. In some circumstances it may be more beneficial to appoint a liquidator to liquidate the company.

The Challenges

Planning for an exit from your business can be challenging on many fronts. There are the various commercial, taxation and regulatory factors to consider. Then there’s the emotional impact that comes with planning to move on from your business that you have built from the ground up.

To deal with this process and make the transition much easier to handle, we do suggest engaging with a trusted accountant or business adviser. Someone who can provide rational and strategic advice, and assist you with your decision-making to help you achieve the best outcome.

Please feel free to schedule a talk with our team from BLG Business Advisers so we can show you our approach and guide you through the process. We are here to help you.

Whatever you decide we wish your business and your future every success!

*Please note that the above information is general advice only. We recommend you seek advice from a specialist relevant to your personal situation. This information is relevant at the time of publishing and is subject to change*