There are several reasons why you might want to sell your business. The most likely is that you are approaching retirement and looking for an exit strategy. Planning for an exit to make the most out of the years you have invested into your business is vital.

There are two routes that a retirement sale is likely to take; a trade sale or a management buyout (MBO).

Statistics on exit planning reveal two important facts. One; 80 per cent of businesses for sale never sell and two; businesses that go straight to market sell for only 70 per cent or 80 per cent of the original asking price.

The key reasons for this failure are:

• Unrealistic value expectations and timescales.
• Poor preparation within the business prior to the sale.
• Unwillingness to use professional advisors.
• Inadequate resources allied to the exit process.

Selling a business is a sales process. More weight should be placed on actual selling rather than on the legal or financial aspects. It is necessary to create a strategy, supported by a business action plan to realise the value.

The best option, if there is a strong management team in place, is an MBO.

Securing funding for an MBO is not as difficult as some business owners and management teams think. Investors favour backing MBO teams because the team already knows the business inside out.

MBO teams can often identify new opportunities for growth and development of the business. The team is unlikely to make rash decisions as it is often reined in by ‘conservative’ shareholders who are getting ready to retire.

Not only that. The MBO team may also be driven by share ownership, growth and personal wealth creation.

With the correct advice, retiring shareholders and business owners can do very well from an MBO. However, careful planning ahead of the decision to retire is necessary to ensure the greatest chance of success.

Three things are critical – planning for funding and investment, careful communications between the MBO team and investors and very detailed business planning.