Which exit strategy should you choose based on your situation?

A clean break and upfront cash – Large group sale

A sale to a large group is often the most straightforward option for certain types of business. These buyers usually have the funds to pay the full consideration upfront, with only a short earn out or post completion adjustment period. Once the deal completes, your involvement is usually minimal, which makes this a strong choice for owners who want to step away quickly and access a sum of cash immediately.
It may not suit you if you prefer to retain some ongoing role in the business and earn a steady income over time. This route works best for those who value certainty, speed and a decisive transition into retirement or a new venture.

From a tax perspective, this type of sale is usually subject to capital gains tax, with Business Asset Disposal Relief potentially reducing the tax rate to 10% on the first £1 million of qualifying gains.

A phased exit with deferred payments – Smaller third party sale

A smaller third-party buyer often relies on structured payments, earn outs or loan notes to fund the acquisition. You may need to stay involved for a period to support the transition and help the new owner settle in. This can work well if you are comfortable with staged proceeds and the idea of a phased exit.
It may be less suitable if you want to walk away immediately or if you are uneasy about proceeds tied to the future performance of the business. The success of this route often depends on the success and profitability of the company and the buyer’s ability to fund payments over time.

You may be taxed on the full gain at the point of sale, even where part of the consideration is deferred or contingent. This can create cash flow considerations if tax is payable before all sale proceeds are received.

Passing control to your management team – Management buyout

A management buyout can be an attractive option when you already have a capable leadership team already in place. They may, however, require external funding to complete the purchase, which means you are likely to receive part of your proceeds upfront and the rest paid during the years following the sale via a financing instrument, such as loan notes.
Owners often choose this route because they trust the team, value continuity and may also be willing to remain involved briefly as a consultant. It may not suit you if you need all your proceeds immediately or if the business cannot comfortably support the repayments. Its success depends heavily on the team’s ability to lead and the company’s capacity to fund the transition.

Deferred proceeds are often structured using loan notes, which can be tax deductible for the company. Advance clearance is typically sought to ensure the transaction is caught by anti-avoidance, such as the transactions in securities rules, ensuring the sale is treated as a capital transaction with capital gains tax treatment.

Prioritising employee ownership and legacy – Employee ownership trust

An employee ownership trust allows the business to be owned for the benefit of its employees. This option tends to appeal to owners who want to preserve the culture of the business, reward the team and ensure a stable long term operating model. It often involves a gradual transition, allowing you to step back over time rather than immediately.
This may not be the best fit if you want a quick exit or if your priority is a higher certainty of immediate proceeds. It is better suited to owners who prioritise legacy and the long term wellbeing of their workforce.

A sale to an employee ownership trust can qualify for a 50% reduction in capital gains tax, subject to the conditions being met. There are also tax advantages for the business post sale, including tax efficient annual bonus payments to employees and reliefs on certain setup and ongoing costs.

Keeping the business within trusted hands – Family or hybrid succession

Some owners choose to involve family members or create a blended succession plan that combines gifting, long term planning and structured buyout arrangements. This route suits those who want the business to remain in trusted hands and who are willing to take a longer view of ownership transfer.
It can be complex if you require significant cash up front, if family dynamics create additional considerations or if the business cannot sustain staggered payments. It tends to be most effective when expectations, roles and responsibilities are clearly aligned.

This type of succession often forms part of longer term inheritance tax planning, with shares in qualifying trading businesses potentially benefiting from up to 50% Business Property Relief.

How business value limits or expands your options

Valuation affects both the structure of the deal and the type of buyer who can realistically complete it. A strong valuation may point you towards groups or buyers with immediate funding available, while a business that is valuable but less cash generative may lend itself to staged payments or management involvement. A reliable valuation helps you understand which options are commercially achievable and how they match your financial expectations.

Where a sale is to a connected party, an independent valuation is typically required to demonstrate that the transaction is taking place at market value. This helps mitigate the risk of HMRC treating the transfer as involving a transfer of value, which could otherwise give rise to inheritance tax or income tax implications.

Matching your exit to your income needs

Whether you want a lump sum, a predictable income stream or a mix of the two will shape which strategies are right for you. Some owners want immediate liquidity to retire or start a new venture. Others are comfortable receiving payments over time, treating deferred consideration like a long term income plan. Your preferred level of involvement after the sale also matters, whether that is stepping away entirely or continuing to contribute in a consultancy role.
The right exit strategy is the one that aligns your financial goals, your lifestyle ambitions and the practical realities of the business and its future owners.

Net proceeds after tax, and the timing of when cash is actually received, are often just as important as the headline sale price. These factors should be assessed carefully when deciding which exit route best supports your post exit income needs.

Need more detailed advice?

If you would like to explore these options in more depth or shape an exit plan tailored to your circumstances, contact Gravita.