Timing Your Exit

When’s the right time to sell your business? It comes down to several things – some you can control and some you can’t. Those uncontrollables can get on top of you too, so you also need to manage your emotions as well as your business. We assess how to tilt the odds in your favour. 

Is timing everything? 

“In the most successful exits, the company should be delivering its peak performance for the months leading up to the final price negotiations and closing.” 

That’s according to exit guru Basil Peters. But while he knows plenty about effective business exits, it’s easier said than done.  

There’s market timing, business maturity and your own personal preparedness to weigh up. There are also the questions you must provide good answers for:  Have you maximised all possible value?  

Is the business ready to operate without you? Have you sought the right advice from the right experts? And what will you do afterwards … more of the same, or take a break, temporary or permanent? 

If you’re thinking this year is about right, you’re in good company. The lagging indicator of Government M&A data say business exits hit a seasonal dip at the end of 2024. They usually bounce up from dips … which is exactly what several leading indicators say, like this KPMG market outlook. 

Why might such surveys indicate an upswing in activity? Business exits are often cyclical. They fall then rise. The fear of higher taxes appears to be a factor – at least anecdotally.  

Moreover, the interest rate environment is slightly more benign. Lower rates tend to be more efficacious and, while 4.25% (at the time of writing) is high compared the post financial crisis average, it’s low compared to the longer-term average. It’s also falling (again at the time of writing) from the latest high of 5.25%. 

Rough always comes with smooth. Beyond these shores, you take your pick of worrying and shocking news from the international macro picture. Within these shores, business confidence is also relatively low. 

Business maturity 

But you can control little of this backdrop. Of far greater importance is the performance of your enterprise, its position in its sector, and the valuation attached to it. 

As Peters says, above, you want to achieve that valuation when your enterprise is firing on all cylinders. You want the business to be demonstrably successful without you at the helm, with cashflow, revenue and profits veering upwards. 

You’ll also need processes and systems that are not reliant on you to manage them. After all, an acquiring company will be paying for what you’ve already accomplished – not what you plan to accomplish.  

Peters also believes: 

“Ideally, the exit strategy should be agreed upon by the founders before the first dollar of investment goes into the company.”  

This is as commonsensical as it is rare. These days, just 49% of UK entrepreneurs have a clear exit strategy.  

All things being equal, you will seek and take advice from your team – board, non-execs, mentors and financial advisers at the least – and all of them will tell you the more meticulous your exit planning, the smoother it will be. 

Exit timing differs according to sector. For example, a fast-growing tech company may attract suitors within two years. Other sectors will take a little longer, especially if you’re manufacturing things.  

And you would be well advised to be ready for a suitor to propose a strategic acquisition when you don’t expect it. After all, a partnership or merger might provide a better future for the business under different leadership. And you can move onto the next idea – or pause for breath. 

Manging the emotion 

The problem is, all this is stressful. Look at any LinkedIn blog of the “I just sold my business and …” variety and sooner or later the writer will comment on just how draining the process was.  

Any of the things we mention above could torpedo a lesser person than you below the waterline. And it’s no surprise to hear that 56% of exiting professionals say it’s down to emotional factors and 44% to personal wellbeing and family considerations – according to recent research. 

Your plan towards, through and beyond exit might look linear on paper or in Excel … but externalities take their toll: all that worry about taxation, rates, what the Chancellor might do next, and how that chap in the Oval office might disrupt your customer relationships. 

And that’s before we’ve got to the genuine sense of loss almost everyone feels about handing your creation to another.  

We’ve barely mentioned financial advice. But this is where it can come into its own. Yes, people like us at First Wealth have plenty of experience in advising entrepreneurs on their business – and especially on balancing it with their personal wealth – but one of the things we’re called on most is to advise. 

Financial planning rarely gets enough attention. It’s the hand on the tiller, the foot hovering above brake and accelerator, and the calm words of wisdom that contextualises all that negativity, keeping you in your seat right until the moment you vacate it for the next person. 

Only recently we had to make the difficult call to advise a client that now might not be the right time after all. Internal metrics just weren’t moving in the right direction at the right velocity. They knew of course – but they hadn’t given the information sufficient attention. 

Our role is to make those difficult calls – as well as the much more pleasant ones – to ensure our clients get the results and the returns they’re entitled to. 

Finding the right time to exit is a blend of art and science. We can help you strike the correct balance between them to get what’s rightfully yours. Give us a call on 020 7467 2700 or ping over an email at hello@firstwealth.co.uk. 

This document is marketing material for a retail audience and does not constitute advice or recommendations. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.