Exiting Your Business in a Time of Increased Insolvency

It seems that everything is coming back to bite small businesses at once – the ending of the moratorium on insolvency proceedings, the paying back of Government-backed Covid support loans, plus spiralling inflation and energy costs.

Hardly surprising, then, that you may be thinking it’s a good time to exit your business and pursue other activities -  but it’s vital you plan and execute your exit strategy carefully, to ensure you come out of it in the strongest possible financial position.

Here’s where you’re likely to need help.

TABS: letters that stand for exit success

Exiting your business means finding the optimum combination of Timing, Approach, Buyer, and Sale (TABS) that enables you to pass on the baton of a going concern and secure an appropriate financial outcome for yourself.

Let’s rearrange things a little here for priority’s sake and start with the Buyer. You need to understand who might buy, and why - whether they be another business, a private investor, or an internal player (e.g. in a management buyout). Each of these prospective buyers is looking for different value from the purchase, and you will need to be able to demonstrate it to them. One size will not fit all.

The Approach, for its part encapsulates not only the planned outcomes for the business, but also for you. How will the business perform without you, and what do you need to do to remedy any shortfalls in this respect before you attempt to sell to a buyer (who will inevitably be looking out for precisely these issues?) What will your role be post-sale - or do you want to simply walk away amicably with money in your pocket?

This brings us to the Sale itself. Not only how much it’s worth, but whether that is enough to fund the next stage of your life and career, and the detailed costing exercises surrounding both these areas.

Finally, Timing – and this can’t be rushed. Every business is different, but exit planning generally needs at least two years to enable you to demonstrate what buyers will be looking for - profits, a positive cashflow, resilience in your business model.

You also need sufficient time to recruit the right people where needed, and onboard the right support team.

Time to exit, or not?

It’s important to understand that business exit as a knee-jerk reaction to an economic downturn never works. It’s not an instant antidote, because – done properly – it cannot possibly be an instant process. Consequently, those who don’t time it effectively will almost certainly undersell themselves.

Much of that effective timing consists in seeking advice from the right business exit specialists, early on – and this is particularly pressing now that the UK economy is in a phase where the challenges are very business-focused and show little sign of abating in the near future.

This isn’t just about the current woes of cost and inflation – it’s also about underlying complications like the skills and labour shortage, falling consumer confidence, and the expenditure-dulling expectation that interest rates will continue to rise. 

So, the question you have to ask yourself is this: “Do I want to run the risk of future insolvency by struggling with several years of macroeconomic challenges over which I will have no control?”

Engage an exit expert

If the answer to that is “yes”, then good for you – the world needs businesses that defy the odds, and many do.

But if the answer is “no”, then business exit is an option worth considering – and it’s only by taking the right advice from the very start of the process that you’ll come out of it with a winning hand.

For more information, advice and guidance about creating the right exit strategy for your business, please contact us at [email protected] or book a free 45 minute consultation.