Starting a business requires courage, but succeeding in today’s challenging economic climate demands a strategic mindset. Business owners are accustomed to managing risk and uncertainty, but recent economic conditions have amplified these challenges. Many owners are now faced with the difficult task of revisiting carefully crafted succession plans and exit strategies, potentially needing to consider selling their businesses sooner than anticipated and possibly at a reduced value.
Exploring Transition as an Alternative
Transitioning ownership may present a preferable solution. Rob Young, Managing Director of Platform 1, specialises in helping business owners achieve optimal returns when selling their businesses. Rob advises beginning with a thorough evaluation of all available options.
Five Methods of Business Sale:
- Close the business and sell the assets.
- Sell to a family member.
- Sell to an employee.
- Conduct a direct sale to an external party.
- Opt for a gradual buy-out, such as the Platform 1 model.
The Platform 1 Gradual Buy-Out Model
The Platform 1 model is a gradual buy-out programme, which involves appointing a manager early in the process. The gradual buy-out involves:
Identifying the ideal candidate to manage the business, recruiting this individual, and investing in their development.
Establishing a structured plan for the new manager to gradually buy into the business over a period of 3 to 6 years. The objective is to facilitate the owner’s exit from day-to-day operations as swiftly as possible by transitioning key relationships and processes to the incoming manager, enabling the owner to assume the role of investor rather than manager.
Key Considerations When Preparing for Sale:
Organise Your Business: Ensure that robust systems and processes are in place, allowing the business to operate independently of the owner and function as a standalone entity.
Maximise Profitability: Focus on driving profitability rather than minimising tax liabilities, as this will enhance the business’s attractiveness and value.
Succession Planning Should Not Be Delayed
Even if selling is not immediately on the horizon, it is prudent to begin succession planning early to maximise business value and secure the best possible outcome. Retirement need not equate to inactivity; if the business can operate as an asset without the owner’s direct involvement, retaining partial ownership is a viable option.
Contact Us About Your Succession Plan
If you do not currently have a succession plan, we can assist in establishing one, ensuring you have flexible options available when the time arises.
