Retiring from your business: where do you start?

Most owners know roughly when they would like to stop. Far fewer know what has to happen first. The sequence below takes you from intention to a realistic plan, starting with the steps that take longest.

Retiring from employment usually means agreeing a date and handing in notice. Retiring from a business you own is different. The company may depend on you, much of your personal wealth may be tied up in it, and someone has to own and run it after you. Each of those needs to be resolved before you can step away comfortably.

The good news is that the process is manageable when it is approached in the right order and with enough time. The stages below are the sequence we see work best for established owner-managed businesses.

A six-stage approach

1. 1

   Stage 1: Decide what retirement means to you

   Is retirement a complete exit, or a reduced role — perhaps as chair, consultant or minority shareholder? Pick an approximate date range rather than a fixed day, and be honest about how much capital you need the business to release.

2. 2

   Stage 2: Assess the business

   Look objectively at how dependent the business is on you, how strong the management team is, how concentrated customers are and how reliable the financial reporting is. These are the areas any buyer or successor will examine first.

3. 3

   Stage 3: Explore ownership options

   Trade sale, management buyout, employee ownership trust, family succession, partial sale and staged exit all have different implications for value, timing and control. Narrow these down early, because each route needs different preparation.

4. 4

   Stage 4: Address weaknesses

   Use the time available to reduce owner dependence, develop managers, document processes, transfer key relationships and tidy contracts. This is where most of the value in exit planning is created.

5. 5

   Stage 5: Establish value and timing

   Understand what the business may realistically be worth and whether that meets your personal requirements. If there is a gap, decide whether to close it through growth, preparation or a different structure.

6. 6

   Stage 6: Begin the appropriate exit process

   Only once the owner, business and route are ready should a formal process begin — whether a confidential sale, an MBO, an EOT or a family transfer.

Questions to settle early

• Roughly when do I want to stop working full time?
• Do I want any continuing involvement or income from the business?
• Can the business operate for a month without me today?
• Who could realistically own or run it after me?
• Are all shareholders aligned on timing and objectives?
• Have I discussed the business's role in my retirement with my financial adviser?

Where to go next

If you are not sure how ready the business is, the Exit Readiness Assessment gives you a score across five areas buyers and successors care about, with practical commentary on where to focus.

This guide is general information only. It is not tax, legal, financial or employment advice. Always take advice from appropriately qualified professionals about your own circumstances.