Exit planning starts earlier than you think – both for the business and personally

You've spent years building your business. But have you thought about what happens when you finally sell it, and whether the proceeds will be enough to fund the life you want?

For many entrepreneurs, selling their business represents the culmination of years, sometimes decades, of hard work.

It's the opportunity to realise the value you've created, reward yourself for the risks you've taken and perhaps finally enjoy some of the things you've been putting off.

But there's a question I believe every business owner should answer long before they start speaking to potential buyers.

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How much do you actually need to sell your business for to fund the rest of your life?

And there's a second, equally important question: what are you going to do when the business that has dominated your life is no longer yours?

A successful business exit requires much more than achieving an attractive sale price. It needs to work financially, commercially and personally.

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Start with your number, not your business valuation

Business owners often have a figure in mind when thinking about selling. Perhaps they've heard what a competitor achieved or have a valuation based on a multiple of earnings.

But a business valuation and the amount you need to achieve financial independence are two very different things.

Before getting caught up in what your business might be worth, think about the lifestyle you want after you've sold it.

Do you want to retire completely, start another business, travel extensively or spend more time with your family? Will you still have a mortgage? Do you want to help your children financially or leave a substantial legacy?

These decisions determine how much money you'll need.

For example, imagine you want to generate £100,000 a year from your investments after selling your business.

Using a simple illustrative withdrawal rate of 4%, you might initially estimate that you'll need £2.5 million of investable assets.

But that isn't necessarily the amount you need to sell your business for.

You need to consider tax on the sale, outstanding borrowing, transaction costs, existing pensions and investments, inflation and how long your money needs to last. The 4% assumption is a starting point for illustration, not a guaranteed or universally sustainable withdrawal rate.

Lifetime cash-flow modelling can bring these factors together, testing different investment returns, expenditure levels, retirement dates and unexpected financial events.

The objective is to establish what you need to receive from your business to fund the life you want, rather than simply chasing the highest possible valuation.

A £5 million sale doesn't necessarily mean £5 million in your bank account

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The headline sale price can be misleading.

How much you receive, when you receive it and the conditions attached to those payments are just as important as the agreed valuation.

Consider an illustrative £5 million sale where the buyer offers £3 million on completion, £1 million in deferred payments and a further £1 million dependent on achieving future performance targets.

You haven't necessarily sold your business for £5 million in any meaningful financial planning sense. You've received £3 million upfront, with another £2 million potentially exposed to commercial and financial risks.

Earnouts, deferred consideration, loan notes, retained shareholdings and performance ratchets can all influence the ultimate value you receive.

An earnout might require you to remain in the business for several years and achieve specified profit or revenue targets. A ratchet could increase or reduce your eventual proceeds depending on future performance.

What happens if the buyer changes the business strategy, reduces investment or makes decisions that affect your ability to achieve those targets?

And what happens if the buyer encounters financial difficulties before paying you?

These are important commercial questions, but they're also fundamental to your personal financial plan.

I would encourage any business owner to understand exactly how much of their sale proceeds are guaranteed, how much remains at risk and whether their financial future depends on achieving targets that may no longer be entirely within their control.

Don't leave tax planning until you've found a buyer

The structure and timing of a business sale can have a substantial impact on the amount you retain.

Business Asset Disposal Relief, for example, can reduce the Capital Gains Tax payable on qualifying business disposals. For disposals from 6 April 2026, the rate is 18% on qualifying gains, subject to the £1 million lifetime limit and eligibility conditions.

However, tax planning shouldn't begin when a buyer presents you with an offer.

Your shareholding structure, the length of time you've owned the business, your role within the company and the nature of its activities can all affect your eligibility for relief.

It's also important to consider the tax treatment of deferred payments, earnouts and any shares you retain in the acquiring business.

Planning early gives your accountant, solicitor and financial planner time to consider the options and ensure the commercial transaction and your personal financial objectives work together.

A slightly lower headline sale price with greater certainty and a more appropriate structure could produce a very different personal financial outcome from a higher offer carrying substantial risks.

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What happens when you stop being the boss?

This is probably the most overlooked part of exit planning.

Imagine spending 20 years building a business. You've been responsible for the strategy, made the important decisions, managed the team and dealt with the challenges.

Your identity has become intrinsically linked to the business.

Then, almost overnight, you sell it.

Perhaps you're required to stay for another two years as an employee, reporting to someone else and watching decisions being made about the business you created.

Alternatively, you walk away completely. The phone stops ringing, the diary suddenly looks empty and the team you've worked with for years carries on without you.

That transition can be much harder than anticipated.

Financial independence doesn't automatically create personal fulfilment.

Before selling, think seriously about what will replace the purpose, structure and relationships your business currently provides.

Perhaps you'll become an investor or non-executive director, mentor other entrepreneurs, pursue charitable interests or launch another venture. Maybe you genuinely want to retire and enjoy more time with your family.

There isn't a right answer, but it's important to have an answer that works for you and those closest to you.

If you're remaining in the business after the sale, make sure you understand what your new role will involve, how much control you'll retain and what happens if the relationship with the new owners doesn't work out.

Planning your next chapter is every bit as important as planning the transaction itself.

‍Turn your sale proceeds into lifelong financial security

Once you've sold your business, your financial circumstances may change dramatically.

For years, much of your wealth has probably been concentrated in one company, an asset you understand and have some control over.

Suddenly, you may have several million pounds sitting in cash or investments, with the responsibility of making that money last for the rest of your life.

The temptation might be to reinvest in another business, purchase property or move everything into investments promising attractive returns.

But the starting point should be your financial plan.

How much money do you need to fund your lifestyle over the next few years? What capital should remain accessible? How much can you afford to invest for the longer term, and what level of investment risk is appropriate?

A sensible investment strategy might combine cash reserves, pensions, ISAs and other investments, structured to provide tax-efficient income and long-term capital growth.

Diversification is particularly important. Having spent years with most of your wealth tied up in one business, there's an opportunity to reduce that concentration of risk rather than simply replacing it with another.

You should also consider inheritance tax and estate planning, particularly if you want to pass wealth to children or future generations.

These decisions need to be considered together. An investment strategy designed purely to maximise returns may be entirely inappropriate for someone whose priority is maintaining their lifestyle and protecting their family's financial security.

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The best time to start planning your exit is before you need to

Whether you're hoping to sell in two years, five years or ten years, early planning creates options.

It gives you time to make the business less dependent on you, develop your management team, address ownership and succession issues and improve its attractiveness to potential buyers.

It also gives you time to build personal wealth outside the company, understand your financial independence number and consider how you want to spend your life after the sale.

Bring your accountant, solicitor, corporate finance adviser and financial planner into the conversation early. Each has an important role, but the real value comes from ensuring they're working towards the same outcome.

After all, the objective isn't simply to achieve the highest possible sale price.

It's to structure an exit that provides the financial security, freedom and personal fulfilment you've spent years working towards.

Selling your business might be the biggest financial transaction of your life. Making sure you can enjoy life after the sale is what really matters.