EveryMonth (September 2013): To be or not to be? That is the question – effective exit planning for owner-managers


Exit planning – Step 1

Those of us who start and run our own companies have many decisions to consider.  A key question that we may be inclined to put off asking ourselves is “when and how will I retire?”  But putting this off indefinitely will not be good for you or your company.

Over the next twelve months I plan to give you my thoughts on this subject in a series of newsletters on the theme of effective exit planning for owner-managers.  These thoughts reflect over 30 years working with owner-managers and I hope you will find them useful.

This first blog gives you some tips on taking the first step.

If you know of someone you think would benefit from this newsletter do forward it to them.

James Hunt and the team at Everyman Legal

Taking the first step …

As the Chinese say, a journey of a thousand miles must begin with a single step. What should that step be for you, the owner-manager?

When you set up your company it will no doubt have been with a mix of hope and fear.  Many of us contemplating our retirement will experience a different kind of fear – that of losing the purpose in our lives.  At the same time you may be just as fearful of letting down your family and your employees by leaving your affairs in a legal muddle when you go.

Sadly in recent years a good deal of our legal work has been probate sales:  acting for a spouse or son in selling the family company. But if such a sale has not been planned and carefully thought through it is very unlikely to produce a satisfactory result for those left behind.

To steer you through a complex problem (and your retirement will be a complex mix of emotion, personal relationships and finance) you will need a guide.  Someone who has been on the journey before with other business owners in similar circumstances.

So what makes a good guide?  What qualities should you look for in the person you choose to be your principal adviser?

It is perhaps easy to begin by listing the people to avoid:

  • Someone who is only partially briefed on your personal affairs, your objectives and on the affairs of the company;
  • Someone who has little or no experience of helping owners transfer their company into new ownership;
  • Someone who does not have the personality or the inclination to take the time and trouble to work with you on a long-term solution;
  • An adviser with a ready solution that may not be appropriate to your situation;
  • A family member who has a personal vested interest in what you decide to do.

Going first to a solicitor who specialises in Wills, Trusts and Probate will almost certainly be a big mistake.  If the shares in your company represent a significant part of your wealth your first step should be to decide on the plan for exiting your company.

Your accountant may well be a trusted adviser who can provide invaluable advice.  However, ask yourself whether he has the rounded background you need in your principal adviser, not only your accounting and tax adviser.

Your principal adviser must have an instinct for business:  someone who can assess the threats and risks as well as the opportunities that you and your business face.

In the complex world of vested interests the more homework you do, the better.  But at the end of the day you will need to go with and trust your instincts.  However, just in case your instincts prove to be wrong, it might be a good idea to protect yourself by engaging your prospective guide for an initial piece of discrete work.  An effective test or trial could be a great way to start a relationship.

Hints and Tips

  • The people you’ve trusted in the past with your tax and legal affairs may not be best qualified to advise you on the your options for the future;
  • Don’t be guided by members of your family who may have a vested interest;
  • Test your instincts by asking your preferred adviser to do a trial piece of work.

Next month’s blog will be on the subject of determining your personal objectives for your exit.