Key points
- Requires a management team that can run the business.
- Income depends on continued profitability.
- Governance and reporting must be formalised.
- Can be a step towards a later sale.
- Recruit or develop a managing director
- Introduce board-level reporting
- Incentivise key staff
When this option may suit
- Owners not ready to sell
- Businesses with reliable leadership in place
- Owners seeking lifestyle change without a transaction
Advantages
- Retains income and control
- No transaction required
- Often increases eventual saleability
Disadvantages
- Capital remains tied up in the business
- Risk remains with the owner
- Requires trust in management
Preparation required
- Recruit or develop a managing director
- Introduce board-level reporting
- Incentivise key staff
Timing
Can be phased over one to three years.
Management implications
Requires a capable leader with genuine authority.
Ownership implications
Owner retains shareholding, perhaps as non-executive chair.
Tax and legal considerations
Remuneration, dividends and incentive schemes have tax implications. The treatment will depend on transaction structure and your circumstances, so take tax and legal advice before implementation.
If I stop working but retain shares, what risks am I still keeping?
You remain exposed to the business’s performance and may have less influence or less access to your capital than before. Dividends are not guaranteed, and a future sale of your remaining shares may depend on agreed rights and other owners’ decisions. Assess information rights, governance, your remaining role and eventual liquidity with advisers before treating retained equity as a dependable replacement for retirement cash.
Full sale vs partial sale
General comparison based on typical UK SME transactions; outcomes depend on the business, the parties and the structure agreed.
Cash realisation
- Full sale
- All of the owner's shares sold (some may be deferred)
- Partial sale
- Only the stake sold is realised
Continued ownership
- Full sale
- None after completion and any earn-out
- Partial sale
- Owner keeps a minority or majority stake
Future upside
- Full sale
- None beyond any earn-out
- Partial sale
- Shares in future growth through the retained stake
Ongoing risk
- Full sale
- Largely removed
- Partial sale
- Retained wealth stays exposed to the business
Involvement
- Full sale
- Handover period, then exit
- Partial sale
- Often continuing, at board or operational level
Governance
- Full sale
- Buyer's governance applies
- Partial sale
- Investor rights, reporting and vetoes need agreeing
Eventual second exit
- Full sale
- Not applicable
- Partial sale
- Needs planning: drag/tag rights, timing, buyer of the remaining stake
Specialist resources
- Discuss value with an adviser — to understand valuation concerns in the context of your objectives before agreeing any specialist support
This is general information, not tax or legal advice.
See also: compare all exit options · check your exit readiness · planning to retire