Passing on to family members
If seriously considering this, owner managers should make sure, first and foremost, that their own financial needs are covered. Standing back and allowing your offspring to make mistakes is much more difficult when your own finances are on the line.

Trade sale
Selling to another business (perhaps even a competitor) can be a financially lucrative option; however the single major obstacle to taking this route is the dependence of the business on the owner manager.

The key is to identify where the value lies, and assess the risks to the buyer. It is generally beneficial to get the assistance of a third party.

Selling to management
For those businesses with a solid second tier management, the option of selling to them (a Management Buy Out or MBO) becomes a viable one. It may be that the family member(s) has some but not all the skills needed to run the business and by creating ownership over a wider team the ongoing success of the business can be made more certain. Other options include the Management Buy-In (MBI) and BIMBO (Buy-In MBO) both variations on the theme where an outside individual invests management time and money.

Employing a manager
It is possible to separate the functions of owner and manager, and generally becomes easier as the business grows in size. Smaller businesses may struggle to employ a suitable replacement and leave sufficient dividends to the owner. Remember that replacing one key individual with another will not solve longer term exit strategies

Carrying on in the business
For some businesses it may be necessary to accept that your business is a lifestyle one, and will not provide a significant capital sum on sale. If this is the case, then you must ensure that your pension provision is provided for out of annual profits.

Each of the above options have their advantages and disadvantages. Assessing the viability of each, in the context of an owner-manager’s personal and financial objectives, is key to selecting the most appropriate exit route.

The author is a Director of Corporate Finance for Prism Corporate Broking – a business broker with a focus on marine businesses.

Prism is arranging a series of confidential, no obligation meetings to help marine business owners to explore the options with regard to mergers and acquisitions, or succession planning. Peter Watson will be at the Southampton Boat Show on 15th and 16th September and meetings can be arranged in advance on a first come first serve basis..

Prism Corporate Broking
T: 01638 743123
W: prismcorporatebroking.com