It is important that you plan to exit your business if not now, sometime into the future. There are 3 options to exit a business:
1. Sell the business
2. Transfer ownership
3. Wind up the business
Sell the business
Deciding to sell a business is a major decision for a business owner. It’s crucial to understand why, when and what you are selling.
Generally when valuing a business it will be more favourable if the income and profits are increasing, and that the industry is a growing industry with potential for the new owners to grow the business further. These factors ensure you will get a premium price for your business.
At some point, you may want to transfer part or all of your business to someone else – whether it’s a family member, colleague, friend or competitor.
The items to consider here are:
· Is management and ownership to be transferred?
· At what point will the transfer occur?
· Will ownership be equal among incoming people (family and/or non family)?
· What are the roles and responsibilities
· What training needs to be undertaken for them to invest?
Once the above is determined you need to consider:
· Is the transfer to be a gift or a sale?
· What stamp duty is required to be paid on the transfer if any?
· What is the tax implications of the transfer?
· If a sale how will it be funded, how?
o A loan from the bank?
o Vendor finance?
Wind up the business
This one depends on your business structure and situation. A sole trader business is probably the least difficult to close, while a business with employees will carry more obligations.
Generally the process includes paying off debts and collecting money owed to the business and selling off assets. One challenge you may face is if you have lease agreements that you need to pay out. If this is an option it is definitely important that you plan when this is to occur.
As you can see there a many options to exit a business but you need to make sure you have a plan as to when you want to exit the business so it is on your terms.