If you are a business owner, considering your business exit strategy can feel as though you are travelling into the unknown. After so many years of working your fingers to the bone to do all you can to ensure your business is a success. It’s only natural that you would feel overwhelmed by the number of different exit options and possible paths.
Understand Your Business Exit Strategy Priorities
Firstly, it’s helpful to weigh up what you value and prioritise; the exit strategy you choose should reflect the direction in which you want your business to flourish post-exit. You may be completely focused on growth and reputation, and believe it is better to be part of something bigger. Alternatively, perhaps your primary concern is that your employees are taken care of, or maybe the aspect you care about the most is protecting the integrity of the brand you have built.
Securing Your Legacy Through an Employee Ownership Trust
For business owners who value their employees and succession planning, an employee ownership trust (EOT) is worth exploring. This is where a company is held in trust, and the employees are indirect owners, having a stake in the company. Members of the trust are also eligible for tax-free bonuses, which is an effective way of incentivising staff. If you want your exit strategy to be tied to rewarding your employees, who will be the next generation of the company, then an EOT offers the perfect solution. It also preserves the DNA and very essence of the company, even after you exit the business.
Consider Different Succession Planning Options
Transitioning to an EOT differs from a management buyout (MBO) due to the approach to ownership. With an MBO, the business owner sells to the management team, who are the sole individuals who bear financial risks and rewards. While this could be a great opportunity for the management team to own the business, it differs from an EOT in that only a select few individuals benefit from the transition. However, both options do allow for smooth business continuity, which is favourable if you value protecting the quality and heart of your brand. A change in values is something you must consider if you are considering undertaking a joint venture (JV) with another company or a trade sale to another company. When two businesses come together to create one, there are guaranteed to be compromises made on both sides in order for the businesses to align successfully.
Future Growth Through a Trade Sale
With a traditional trade sale, there is a very real risk that the role that employees play in the company could change under new ownership. This may be the preferred option for business owners who are more focused on growing the size of the company in the future, as opposed to maintaining the company values and a seamless transitioned company structure. It is possible that the buyer has different strategic goals and therefore intends to lead your business in a different direction than anticipated. However, for business owners who are interested in their businesses being part of something bigger, this may be the preferred route.
How fds Can Help You
If you would like to discuss your exit options, whether that be an EOT or another exit strategy, we are here to help you. We recommend contacting us to discuss your succession planning options via a confidential discussion.