Cast your mind back to the earliest days of your business. Amid the heady excitement of choosing premises, refining products, gathering staff, did you ever stop to think about the day years ahead when you would decide to sell up? The answer, in many cases, is no.

So how can you navigate in good time through the options – trade sale, management buy-out, management buy-in, flotation or family succession – to choose the right path for you? Do you want to exit at a certain age, or when the business is at a certain value? What package do you need for your plans? Do you want the cash immediately, or are you amenable to the idea of a gradual withdrawal? You will need to consider whether your sector is growing or shrinking; if the latter, a trade sale could be difficult. Do not forget to look to the future; can your business stay abreast of technological advances? Is legislation looming?

If you simply want the biggest lump sum possible, to fund retirement, for example, a trade sale would be the traditional route. Be aware, though, that your continued involvement in the business, from a few months to three years, will often be a condition of sale. Often there will be an ‘earn-out’ period where the size of your lump sum will be tied to company performance over the next few years.

But even if you are after a big lump sum, a trade sale should not be an automatic choice. If your business is showing steady cash flow and stable growth, you might consider a management buy-out (MBO), in which your management team raise money from a bank, or private equity from venture capitalists, to buy the business.

MBOs are often structured so that the vendor retains a stake in the business: one to consider if you see serious growth ahead. The same applies to management buy-ins, in which external management teams buy from you. Increasingly common are combinations of the two, known as Bimbos, in which external managers are brought into an MBO to strengthen the existing team.
Flotation on AIM, the exchange specially tailored to growing businesses, is another answer, but be aware that going public is not an exit in the short term. You will only be able to sell your shares gradually and if you run the business, and you will face the added pressures that come with running a public company. So if you want out in a year, AIM may not be right for you. It will work only as part of a five- or ten-year exit plan. It is more a way of raising capital to take a business to the next stage.

Whichever option you choose, your planning should always be informed by one issue: tax. Since 1998 business owners selling shares in their own business, as long as they have owned those shares for two years, are eligible for taper relief, meaning they pay only 10 per cent tax, rather than the higher capital gains tax rates of 20 or 40 per cent.

That also applies if you decide on a family succession to hand over your business to a son or daughter, but the complexities, and inheritance tax issues, mean that anybody doing so must take professional advice.

There are likely to be number of mix-and-match options appropriate for your situation. You’ll also find that the best plan borrows elements from two or more traditional routes for your exit. Whichever option you choose, your planning should always be informed.

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