What Are My Business Exit Options?

How to Choose the Right Route for You and Your Business

“I want to sell my business.”

It sounds like a reasonably clear objective.

Until you start asking what “sell” actually means.

Do you want to walk off into the sunset with riches beyond your wildest dreams never to return?

Or rather have a decent capital event but stay involved?

Would you love to hand the business to your management team one day, not least to protect its culture and legacy?

Deep down, would you be happy to retain ownership if you didn't have to run the business every day?

Perhaps you're in a family business and are looking to pass it to the next generation?

Or perhaps what you really want is simply to have more choice than you have today.

There are several ways to exit or step back from a business, and the right route for one owner may be completely wrong for another.

Which is why I think one of the biggest mistakes you can make in exit planning is deciding on the route before you are clear on what you actually want to achieve.

Before asking:

“How should I exit my business?”

it's helpful to ask:

“What do I actually want my exit to achieve?”

And then, because a wish is not a business plan:

“What can my business realistically support?”

The best exit route is likely to be found somewhere in the intersection between those two answers.

What are the main ways to exit an SME?

For most owner-managed SMEs, the options worth considering include some combination of:

• selling to another business, usually known as a trade sale
• selling all or part of the business to a private equity investor or another financial buyer
• selling to the existing management team through a management buyout
• transitioning ownership through an Employee Ownership Trust
• passing the business to family or another chosen successor
• retaining ownership while stepping back from day-to-day management
• continuing to own and run the business for longer
• in some circumstances, closing or winding down the business in an orderly way

There are variations within all of these, and the financial, legal and tax implications can be very different. Specialist advice becomes important once you start seriously exploring a particular route.

A sale to an individual buyer is another possibility. Depending on the business, the funding and handover considerations may be different from those involved in a trade sale.

But before getting into the technicalities, it helps to understand what each option might mean for you as an owner.

1. Selling to a trade buyer

A trade sale means selling your business to another company. That might be a competitor looking to expand or remove competition, a supplier seeking another route to market, a customer wanting to bring your capability in-house, or a larger organisation looking for access to your market, customers, products or expertise.

For many founders, this is the route they picture when they imagine “selling the business”. Done well, it can provide the significant capital event that rewards years of hard work and, depending on the deal, potentially offer a relatively clean exit.

But finding the right buyer is far from guaranteed. Even an attractive business may struggle to find a buyer whose ambitions, expectations and resources align with those of the owner. And finding an interested buyer is only the beginning. Agreeing the terms and successfully completing a transaction can be another challenge altogether.

A trade sale is more likely to be realistic where:

• there are identifiable strategic buyers for the business
• your company offers something they would value or find difficult to build themselves
• the financial performance and future opportunity are attractive
• the business can transfer successfully without relying excessively on you
• you ultimately want to relinquish ownership

Even where a buyer is found, a sale does not necessarily mean handing over the keys and disappearing into the sunset. If important relationships, knowledge or revenue still depend on you, the buyer may want you to remain involved through a handover or earn-out period.

It is also worth thinking about what happens to the business once it is no longer yours. A new owner may change systems, restructure the team, absorb the company into a larger organisation or take the brand in a direction you would not have chosen yourself.

If protecting your people, culture, brand or legacy matters strongly to you, that should form part of your thinking about the kind of buyer and deal you want, rather than being something you only consider after the sale.

2. Selling all or part of the business to private equity

Private equity sometimes gets mentally filed under “big businesses”, but it can be relevant to established SMEs too.

Private equity can be relevant to some established SMEs, but the size, profitability, growth potential and management capability of the business all matter. For many smaller owner-managed businesses, it may be a longer-term ambition rather than a realistic immediate exit route.

A PE transaction may involve selling a controlling stake or, in some situations, a smaller shareholding while retaining an interest in the future business.

That can suit founders who want to realise some of the value they have built but are not necessarily ready to leave altogether.

Perhaps you still enjoy the business but want additional capital, expertise or support to take it through its next stage.

Perhaps you would like to reduce the amount of your personal wealth tied up in one company.

Or perhaps the prospect of having another go at growth, with some money already safely off the table, sounds rather more attractive than doing it all again entirely at your own risk.

The important point is that a PE deal may be the beginning of another chapter rather than the end of your involvement.

That means asking yourself not only:

“Am I happy with the price?”

but:

“Do I want to work within this new ownership structure?”

If you have spent 15 years enjoying the fact that nobody can tell you what to do and your goals are all your own, discovering after completion that somebody now rather legitimately can is worth thinking about in advance.

3. A management buyout

A management buyout, or MBO, is where members of the existing management team acquire the business.

For a founder who cares deeply about continuity, this can be an attractive idea.

The people taking over already know the company, its customers, its culture and its quirks. You may have worked alongside them for years and trust them to look after what you have built.

But liking the idea and having an MBO-ready business are two different things.

You need to consider:

• Is there genuinely a capable management team?
• Do they actually want to own the business, and when and how do you ask without causing chaos and resentment?
• Can they lead it without you?
• Can an appropriate transaction be financed?
• Is there one clear future leader, or a group capable of making decisions together?
• Are you willing to let them run it their way rather than yours?

That last question can be surprisingly important.

It is one thing to say, “I'd love the team to take over.”

It is another to watch them make a decision you would never have made yourself.

An MBO requires preparation on both sides. The team has to become capable of owning and leading the business, and the founder has to become capable of letting them.

4. An Employee Ownership Trust

An Employee Ownership Trust, or EOT, offers another way of transferring ownership to the people working in the business.

Rather than individual employees personally buying the company, a trust holds a controlling interest in the business for the benefit of eligible employees.

For some founders, the attraction goes well beyond the financial mechanics.

It may provide a way of preserving independence, sharing future success with employees and protecting aspects of culture or legacy that matter to them.

But an EOT should not be treated as the “nice” exit option that automatically solves everything.

The business still needs to be capable of operating without excessive founder dependence.

There needs to be appropriate leadership and governance.

The financial structure has to work.

And the founder needs to be comfortable with what transferring control really means.

EOTs also involve specific legal, governance, financing and tax considerations, and the tax rules have changed in recent years. Specialist advice is essential before deciding whether this is a suitable route.

The starting question, though, is simpler:

Would employee ownership genuinely suit this business and the people who work in it?

Not simply:

“I've heard EOTs can be tax-efficient. Should I do one?”

Structure should follow purpose, not the other way around.

5. Passing the business to family or another successor

For family businesses in particular, succession may seem like the obvious answer.

Perhaps your children already work in the company.

Perhaps another family member taking over is the way it's always been.

Or perhaps there is a trusted individual inside the organisation who feels like the natural successor.

This route can preserve considerable continuity.

It can also introduce some rather complicated conversations around ownership, leadership, fairness, capability and family expectations. If you've ever watched the tremendous TV series Succession, you'll know what I mean.

It's important not to start with the assumption:

“X should inherit the business.”

but rather:

“Who might be genuinely willing and able to lead it successfully?”

Those are not always the same answer.

A successor needs time to develop credibility and capability, and the founder needs to transfer responsibility properly rather than remaining the unofficial final decision-maker indefinitely.

It is also worth remembering that the most willing or vocal candidate may not be the most capable.

Succession works best when it is planned as a leadership transition, not simply an ownership transfer.

6. Keeping ownership but stepping back

Sometimes an owner thinks they desperately want to sell because it feels like the only way to escape their all-consuming business ownership “job”.

I've spoken with numerous business owners who are sick of managing people, or for whom the operational grind, with negligible holiday and no sick pay, has lost its appeal. Essentially, they just want the pain to stop.

When we delve a little deeper, they would often happily remain involved in strategy, product development or key relationships. They simply no longer want to be the person holding everything together.

If the business can support appropriate leadership, retaining ownership while appointing or developing someone else to run it can be a genuinely attractive option. For some owners, the future income from keeping the business may be more appealing than what a sale could deliver. The value of a business is always in the eye of the beholder.

As an owner, building a better, more “grown-up” business may allow you to retain the asset and receive future income while creating considerably more freedom.

But there is a catch.

You have to genuinely step back.

Installing a managing director and then continuing to override every important decision is not stepping back. It is adding an expensive extra layer of management while carrying on much as before.

7. Staying put, for now

This option deserves much more respect than it sometimes gets.

Not exiting is a perfectly legitimate decision, provided you have given it active thought rather than drifting along with the status quo.

You may explore your options and decide:

“Actually, I still enjoy this. I'm not ready to decide a route yet.”

This does not mean that exit planning has failed or is a waste of time.

Thinking properly about exit now, which after all is inevitable in some form, means knowing more about what you want, where the business stands and what would increase your choices later.

You might spend the next two years building a better business by reducing founder dependence, developing the team, strengthening profitability or simply making the business easier to own, then revisit the question in a year or two.

Having said that, keeping your options open should not become an excuse for simply kicking the can down the road.

Some exit routes require much more preparation than others. If your dream is to sell for a life-changing sum to a private equity investor, for example, you need to build the kind of business PE actually wants to buy.

Private equity firms often look for established, profitable and growing businesses with a credible opportunity to scale, a strong management team, reliable financial performance and a business model that can grow without everything depending on the founder. If private equity is your ambition, the question isn't simply whether you want to sell to an investor one day. It's whether you have, or could realistically build, the kind of business that investor wants to buy.

The same principle applies to other routes. An MBO needs a capable management team. A clean trade sale requires a transferable business. Family succession requires a credible successor.

You don't necessarily need to choose your route early, but you do need to understand whether delaying action today might close off choices tomorrow.

And sometimes the answer is closure

This is the option that doesn't get much attention in glossy social-media success stories. It doesn't quite fit the triumphal LinkedIn narrative.

But in reality, not every business will be sold or passed on.

Sometimes an owner decides that an orderly wind-down is the right outcome.

The business may be too dependent on them to transfer economically.

There may be no suitable successor.

The market may have changed.

Or the owner may simply decide that the time, cost and compromises involved in trying to engineer a sale do not make sense.

That does not automatically mean failure.

The relevant question is whether closure is a conscious, well-managed decision or something circumstances eventually force upon you because no other options were developed in time.

Even where closure is the preferred route, preparation matters for employees, customers, suppliers, finances and the owner themselves.

Where do you start if you don't know which exit option is right for you?

You don't need to choose your exit route today.

A better place to start is by understanding two things: what you want your eventual exit to achieve, and what your business is currently capable of supporting.

You may discover that several routes are already realistic. Or that the option you instinctively favour will require some work over the next few years. You may even discover that what you really want is not to sell at all, but to build a business that gives you more freedom.

That clarity is the starting point for creating better options rather than committing too early to the wrong one.

Find out how exit-ready your business is

If you're starting to think about what your eventual exit might look like, the free Exit Compass Exit Readiness Assessment is a good place to begin.

It looks at twelve areas of commercial, organisational and owner readiness, helping you understand where your business is already strong, where there may be constraints, and what could affect the options available to you.

You'll receive your personal Exit Readiness Map, giving you a clearer picture of where you stand and what may deserve attention.

The Assessment won't put a value on your business or tell you which exit route to choose. Instead, it gives you a starting point for making more informed decisions about your future.

If you'd like to explore what your results mean for your particular circumstances, the 90-minute Clarity & Options Session provides an opportunity to consider the routes available to you and identify your most important next steps.

Take the free Exit Readiness Assessment

About the Author:

Emily Potts is an exit strategist and transition coach, a former management consultant and an exited business owner. She spent more than a decade building and running her own e-commerce business, which she sold in 2017. She now helps owners of established SMEs explore their options, strengthen the value and transferability of their businesses, and prepare for what comes next.