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Chris Kelly, a director at Jacobs Allen, has some advice for business owners thinking of retiring

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My heart sinks when a business owner tells me they want to retire and simply intend to wind up their business, but haven’t considered selling it. If, after the buffeting from the lockdowns, too many good businesses simply decide to wind up and make staff redundant, it will be a loss to us all.

Prior to the pandemic, research was carried out by the Corporate Finance Network which identified that 14 per cent of the 1.7 million businesses in the UK with a turnover of under £10 million had an average director age of over 60.

More worryingly, when looking specifically at the better quality businesses with higher credit scores, this figure increased to 21 per cent. These are businesses which could be lost unless they are sold on when directors (who are also likely to be business owners) retire.

Chris Kelly, a director at Jacobs Allen
Chris Kelly, a director at Jacobs Allen

Pre-Covid, it was estimated that 60,000 businesses wind up in a normal year due to retirement because they are not sold. This means a loss of output to the economy and probable redundancies.

Owners are often attracted to the wind up route because they just don’t know how and where they might sell. However, the practicalities of just closing down or winding up a company usually mean that the business owner receives significantly less than they expected once bad debts, stock and asset write offs and redundancy costs are factored in.

Selling the business as a going concern will nearly always generate a better return for the business owner, and winding up a company if necessary after such a disposal will still attract the 10 per cent business asset disposal relief rate of tax.

Jacobs Allen
Jacobs Allen

Often owners think that a sale process is too complicated, are concerned about the confidentiality issues and struggle to access advice they trust. This shouldn’t be so, and there is little downside in trying to sell when measured against a wind up, which remains an option if all else fails.

You only get to sell or close your business once and accountants with a corporate finance specialism who are familiar with this approach are in a unique position to support business owners with this strategic decision making. By demystifying the process of selling a business we can encourage business owners to be more comfortable in pursuing this option. This would benefit not only the business owner, but also the employees and the local economy as a whole.

-- Contact Jacobs Allen via its website

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