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Exiting your business:
Management issues

A business is often run along informal lines, particularly in small and medium sized enterprises. Typically, everybody knows their role within the organisation because they have been doing the job for some time, and the relationships established between suppliers and customers are based on mutual trust and understanding.

If this is the case with your business, you should ask yourself whether the operational structure of the business could fall apart after your exit. If you are looking to sell your business, a potential purchaser will consider this a risk factor and, even if they proceed, may want to keep you on for an extended period and, or, to negotiate a price reduction. Family successions have failed where, after a premature death, the successor does not know how the business is run.

You should consider putting your essential relationships on a contractual footing, for example by giving staff employment contracts and establishing contracts with suppliers and customers. You should also try to introduce formal procedures and instructions for key operational systems.

You should run the business with your exit in mind by trying to reduce its dependence on you and your own contribution. As examples:

If you personally provide a service to clients then much of the value of the business might be related to your own personal contribution. You should consider employing staff to provide that service whilst you take on a more managerial role.

If you are, say, the managing director and major shareholder of a company who has been the person driving the company forward, then you may need to take more of a back seat and recruit additional managers who would be capable of taking the wheel if you sold the company.

Your employees may well be critical to the success of your business. In the period of uncertainty during and in the immediate aftermath of the exit process, employees might be tempted to leave. Consider offering incentives, such as a share scheme or bonus scheme, to encourage them to stay with the company. This is covered in more detail in our Running a business section. To be redirected to the relevant page, click here for further information.