When and how to prepare for a business exit

The need to exit a business can arise for many reasons—retirement, ill health, personal circumstances, or even disputes. Often, these events are beyond the control of the business owner, which is why it’s so important to be prepared. Without a clear plan, an unplanned exit can disrupt operations, damage value, and create uncertainty for employees, customers, and other key stakeholders.

Whether you’re planning ahead or responding to a change in circumstances, having a well-thought-out, flexible exit strategy can help ensure a smooth transition and protect the business you’ve worked hard to build.

When should you start to prepare for a business exit?

It’s never too soon to start preparing. Governing documents, such as partnership agreements or company articles, should ideally include provisions to address common exit scenarios—valuation approaches, permitted transfers, restrictions, and continuity planning.

Regardless of what plans a company may have in place right now, we’d recommend directors and shareholders carry out an annual review of exit planning, as being proactive should any unforeseen event arise is far better than simply needing to be reactive.

How should you prepare for a business exit?

In preparing for a shareholder exit, there are some typical steps we’d recommend directors and shareholders consider:

1. Consider your exit objective and motivations

What do you want or need to achieve on an exit? Do you want a complete withdrawal from the business, or would you like to retain a small shareholding for a continued income stream or for sentimental reasons?

2. Know your worth

Make sure you have a fair market valuation for the business or your interest in it.

Consider whether any discount is necessary based on the nature of the ownership or control.

3. Review available exit strategies

Explore the options available to you and be realistic about which are genuinely open. Some depend on having a successor, others on the business reaching a size that attracts an external buyer. Once you know which option you prefer, more advanced preparation can begin (see below).

4. Structure the exit

Consider how you want to receive the proceeds due to you on exit. Cash is key, but you might want to manage this with cashflow requirements of the new owners, or you may wish to defer some of the tax payable by you on sale, to spread the total tax cost. Other consideration options might be available, such as preference shares or loan notes, to make the deal structure most attractive to all parties.

5. Evaluate the timing of exit

Timing can make a significant difference to the tax you pay, especially where business asset disposal relief is available. The relief has been  reduced in stages: the tax rate rose from 10% to 14% from 6 April 2025, and to 18% from 6 April 2026.

The practical point now is that the increase has already happened. There is no deadline to beat, and nothing to be gained by rushing a sale that is not otherwise ready. What has changed is the arithmetic: an owner who last modelled their net proceeds on a 10% or 14% tax rate for the first £1m of proceeds is looking at a materially different figure, especially with the additional increase at the end of 2024, in the main rate of capital gains tax to 24%, and the gap can be wide enough to affect whether a deal still meets their objectives. So, make sure you revisit the numbers before committing to a timetable.

Further change is possible: Budget speculation has put capital gains tax back in focus for business owners

6. Seek professional advice on the exit implications

A business exit can be complex and there’s plenty of room for error, which can leave you with an unintended tax outcome. Developing a tax strategy early in the process can help ensure the deal structure meets your objectives in the most tax-efficient way.

Which is the best exit strategy?

There is no single best route when it comes to best exit strategy. It all depends on the size of the business, whether a successor is in place, and how each option is taxed.

We have set out all eight options in detail, including the usual consideration structure and how the proceeds are treated for tax: compare the eight business exit routes.

From structuring deals to managing tax implications, we’re here to support you every step of the way, we can help advise you on all of the above.