Introduction – eight in ten have no exit plan

A recent survey of small business owners has revealed that eight in ten of them have no exit plan. This is even though life, health, and market conditions may sometimes dictate exits before an owner is ready.

Many entrepreneurs understandably feel a deep emotional connection to their business, especially when it has been built from scratch. However, failing to plan an exit can have serious consequences for both value and tax efficiency.

Then, if you are forced into a position without having taken the time to think about the consequences, well that may not end well.

 

The valuation problem

One of the main challenges reported by business owners was uncertainty around valuation. How much is my business worth? How do I know if I am getting a fair value for it?

These are often difficult questions to answer without the context of what a potential buyer might actually pay. But valuation is not just about market value. For tax purposes, HMRC also applies its own rules when looking at a sale or succession, which can affect how reliefs apply and what the eventual tax liability looks like.

 

Asset sale vs share sale

Another key decision is whether the exit will be structured as a sale of the company’s shares, or of its underlying assets. Each route has different implications: a share sale is usually simpler and may be more tax-efficient for the seller (for example, potentially qualifying for Business Asset Disposal Relief. However, an asset sale can be more attractive to the buyer, who may prefer to “cherry-pick” assets without inheriting company liabilities, but this is often less efficient for the seller, as tax charges can arise both within the company and on extraction of proceeds.

 

Pre-sale tax health checks

The survey also noted that only a fifth of business owners have ever sought professional advice on a sale.

This is where a pre-sale tax “health check” from ETC Tax comes in. Such a review typically covers:

• Obtaining a professional valuation to set realistic expectations.
• Checking eligibility for Business Asset Disposal Relief (and restructuring shareholdings where possible to optimise relief).
• Reviewing the company’s structure – for example, whether subsidiaries or non-core assets could and should and be removed prior to a sale.
• Planning around loan accounts and dividends to avoid unexpected tax charges.
• Reviewing the balance sheet to deal with excess cash, inter-company loans, or property that may complicate a deal.
• Carrying out “self-diligence” to make sure that the tax affairs of the business and its owners are in order before a buyer’s due diligence highlights problems.

Beyond sale, succession and wind-down

Interestingly, the survey also found that many owners consider simply “handing” their business to family, or even winding it down.

But even these options may come with their own tax considerations. Passing a business to the next generation may mean that certain inheritance tax reliefs, such as Business Relief, apply but only if conditions are met and changes are coming from April 2026.

Equally, winding down without a sale may mean leaving value on the table. However, if that is the chosen route, careful planning can ensure extraction of cash is effected tax efficiently, whether through capital treatment on liquidation or planning for distributions.

Conclusion

The survey highlights a worrying truth: most business owners are unprepared for their own exit. Hmmm…

But whether the objective is a sale, succession, or simply winding-down, the earlier planning starts, the more control the business owner has over value, timing, and tax outcomes.

If you have any queries about this article or in relation to business exit planning and valuations, or would like to enquire about a pre-sale tax health check (it’s never too early!) then please get in touch.