Recently, I had the privilege of hosting an engaging dinner with clients from the insolvency practitioner sector, which proved to be an insightful evening of conversation. As we explored the challenges entrepreneurs face during business exits, it became clear how emotionally and financially demanding these transitions can be.
One of the central themes that emerged was the emotional strain often associated with exiting a business. Many practitioners shared stories of entrepreneurs struggling to part with a business they had worked hard to build. It’s not just about financial concerns; it’s the emotional connection to the company, the legacy it represents, and the relationships with long-standing employees. For many entrepreneurs, the business becomes an integral part of their identity, making the exit process particularly difficult.
Another important point discussed was the necessity of having the right advisers. The exit process involves legal, financial, and operational complexities, so having experienced professionals who can provide clear, reliable guidance is crucial. Entrepreneurs who seek quality advice tend to navigate the process with more confidence and less risk, avoiding potential pitfalls such as undervaluing their business or making costly mistakes.
Preparation also featured prominently in our discussion. The consensus among the group was that planning an exit years in advance can significantly improve the chances of a successful transition. One practitioner shared a case where an entrepreneur had begun planning their exit three years before selling their business, which allowed them to get their affairs in order and achieve a favourable deal. On the other hand, those who rushed the process often faced less favourable offers or deals that fell through.
Succession planning was another key focus, particularly for family-owned businesses. The challenge of handing over the reins to the next generation can cause tensions within families, especially if there are disagreements about the future direction of the business. One example shared was a family business where siblings couldn’t agree on succession terms, leading to costly delays and emotional stress. Having a clear and well-thought-out succession plan, whether it involves passing the business on to family members, internal leadership, or external buyers, can help prevent such issues and ensure the business’s continued success.
The evening also highlighted the importance of post-exit planning. Entrepreneurs often experience uncertainty after selling their business and can struggle to adjust to life without it. Having a plan for the next stage – whether it’s starting a new venture, engaging in philanthropy, or enjoying retirement – can help ease the transition and provide clarity for life after the exit.
Based on the valuable insights shared that evening, here are my top tips for entrepreneurs considering an exit:
Start planning early. The earlier you begin preparing for your exit, the more control you’ll have over the process, making it easier to get your business ready for sale.
Select the right advisers. Surround yourself with trusted professionals who understand your goals and can guide you through the complexities of the exit.
Be prepared for the emotional impact. Understand that the process can be emotionally challenging, and ensure you have the right support in place.
Stay flexible. The exit process may not go as planned, so be ready to adapt to any changes that come your way.
Successful business exits require careful preparation, the right advisers, and an understanding of the emotional and practical challenges involved. By planning ahead and being flexible, entrepreneurs can ensure that their transition is as smooth and successful as possible.
Arbuthnot Banking Group PLC (LON:ARBB), trading as Arbuthnot Latham, provides private and commercial banking products and services in the United Kingdom. Founded in 1833, Arbuthnot Banking is based in London, United Kingdom.
