Deciding to sell your business is a major milestone. Deciding how you leave it can be just as important.
There's no single "best" way to exit a business. The right route depends on your personal goals, how your business is structured, who's involved in running it and what you want life to look like after you've stepped away.
If you're still several years away from selling, that's often an advantage. Starting your exit planning early gives you more time to understand your options, strengthen your business and prepare for the exit route that's right for you.
Why Your Exit Route Matters
The way you choose to exit can have a significant impact on both the transaction itself and what happens afterwards.
That's why it's worth considering your options well before you're ready to sell. The best exit isn't necessarily the one that delivers the highest headline price. It's the one that best matches your personal, financial and commercial goals.
Trade Sale
A trade sale involves selling your business to another company. In many cases, this will be a business operating in the same or a related industry, although buyers can also include suppliers, customers or investors looking to expand through acquisition.
What Is a Trade Sale?
A trade sale is the most common exit route for owner-managed businesses.
Potential buyers may include:
- A competitor looking to increase market share
- A supplier or customer looking to expand vertically
- A business entering a new market
- A private investor or investment group
The buyer takes ownership of the business and, depending on the agreement, the existing owner may leave immediately or remain involved for a transitional period.
Why Owners Choose This Route
A trade sale often offers access to the widest pool of potential buyers and, in some cases, the highest purchase price. Strategic buyers may also be willing to pay a premium if your business complements their existing operations or helps accelerate their growth.
Things to Consider
The priorities of an external buyer may differ from your own. Depending on the transaction, there may be changes to the management team, employees or the direction of the business after completion. Owners should also be prepared for a detailed due diligence process before the sale can be finalised.
Management Buyout (MBO)
A management buyout (MBO) involves selling the business to members of your existing management team. Rather than an external buyer taking ownership, the people already helping to run the business become its new owners.
What Is a Management Buyout?
In an MBO, the management team purchases the business from the current owner. Funding may come from the managers themselves, external lenders, investors or a combination of different sources.
For many owners, it can feel like a natural progression, with leadership passing to people who already understand the business, its customers and its employees.
Why Owners Choose This Route
An MBO can offer continuity for both the owner and the business. Existing relationships remain in place, employees already know the leadership team and customers are often reassured by a familiar transition.
For owners who have spent years building a trusted management team, it can also be a rewarding way to hand over the business to people who have helped contribute to its success.
Things to Consider
A successful management buyout depends on having a capable management team that's ready to lead the business independently. Funding also needs to be secured, which can take time, and it's not uncommon for part of the purchase price to be paid over an agreed period rather than entirely upfront.
That's why many businesses begin preparing for a potential MBO years before a sale takes place, giving future leaders time to develop and take on greater responsibility.
Related reading: Why Owner Dependency Reduces Business Value
Employee Ownership Trust (EOT)
An Employee Ownership Trust (EOT) involves selling a controlling interest in your business to a trust that owns the company on behalf of its employees. Rather than individual employees buying shares themselves, the trust holds the business for the long-term benefit of the workforce.
What Is an Employee Ownership Trust?
With an EOT, employees don't become direct shareholders. Instead, the trust becomes the majority owner while the existing management team continues to run the business.
For many businesses, it offers a way to transfer ownership while preserving the company's independence and rewarding the people who have helped build it.
Why Owners Choose This Route
For some owners, an EOT provides an opportunity to protect the culture and values they've worked hard to create. It can also help preserve the independence of the business while recognising the contribution employees have made over many years.
Rather than selling to an external buyer, many owners see an EOT as a way of securing the long-term future of the business and the people within it.
Things to Consider
An Employee Ownership Trust isn't the right solution for every business. It has specific legal and qualifying requirements, and the purchase price is often paid over a period of time rather than entirely upfront.
It's also important to understand the wider tax, legal and commercial implications before deciding whether an EOT is the right route for your business.
Related reading: How to Sell Your Business Tax-Efficiently
Please note: These aren't the only ways to exit a business, but they're three of the most common options for owner-managed businesses.
Which Exit Route Might Suit You?
The right exit route will depend on what matters most to you. For some owners, achieving the highest possible sale price is the priority. Others are more focused on protecting their employees, preserving the culture they've built or passing leadership to people they already trust.
Different routes tend to suit different objectives:
If your priority is maximising value
A trade sale may be worth exploring, particularly if your business could offer strategic value to another company operating in your sector.
If your priority is rewarding your management team
A management buyout can provide continuity while giving trusted leaders the opportunity to take the business forward.
If your priority is protecting company culture
An Employee Ownership Trust may allow the business to remain independent while rewarding the employees who have contributed to its success.
If your priority is keeping the business in the family
A family succession could also be worth considering. Passing ownership to the next generation is another common exit route for owner-managed businesses and often benefits from long-term planning.
Whatever route you eventually choose, understanding your options early gives you more flexibility and more time to prepare both yourself and the business for a successful transition
Can You Change Your Mind?
Absolutely. Starting your exit planning doesn't mean committing to a particular route straight away. In fact, many business owners begin the process with one option in mind before deciding another is a better fit as their circumstances change.
You may initially expect to sell to another business, only to realise your management team is capable of taking ownership. Equally, an owner considering a management buyout may later decide that an Employee Ownership Trust or family succession better reflects their long-term goals.
The earlier you start planning, the more time you have to explore your options, strengthen the business and make informed decisions without feeling pressured by a looming sale.
Related reading: When Should You Start Planning to Sell Your Business?
Whatever Your Exit Route, Preparation Still Matters
Whether you eventually sell to another company, your management team or an Employee Ownership Trust, buyers and advisers will still be looking for many of the same qualities.
They want to see a business that's profitable, well managed and capable of succeeding without relying heavily on its owner.
Many of the improvements that make a business attractive to trade buyers, management teams and Employee Ownership Trusts are the same changes that increase the value of your business before selling, reduce owner dependency and make due diligence significantly easier.
Strong financial reporting, documented systems, clear growth opportunities and reduced owner dependency all help create confidence, regardless of who's taking ownership.
The earlier you begin strengthening those areas, the more flexibility you're likely to have when the time comes to leave the business.
Our business exit planning services help owner-managed businesses prepare for a successful future exit by identifying opportunities to increase business value, reduce owner dependency and build a business that's ready for whichever exit route proves to be the right one.