Why do you want to exit your business?

Hello again from Melo.

This is the first of four posts to help you explore your motivations for exiting your business – and help you design your future work life if that’s in your plans.

In this post, we’ll focus on the factors pushing many advice business owners to consider an exit and help you to start exploring your future.

In the second post, we’ll explore some relatively new research to see how we make serious errors in our approach to future life planning. And we’ll suggest two ways to avoid falling into that trap.

Then, in the final two posts (for those who’ll continue working after selling their business), we’ll outline various evidence-based ways of approaching the design of your future work life.

So, let’s get started.

This series of posts is all about YOU!

One of our favourite maxims at Melo is that everbody exits – the only question is whether you’re bought out, pushed out or wheeled out!

Sorry if that sounds harsh, but it’s true – at some point, you will leave your business.

And, if you’re able, you’ll want to take control of that process – because nothing causes stress like uncertainty and feeling out of control.

You’ll want to get on top of the many challenges to achieving a good exit, which, as the picture shows, means an exit that’s good for you, your team, and your clients.

And it must be good for your buyers if you’re to receive your earnout payments in full.

Earnout payments might account for 50% of the price paid but are spread over a few years after you sell.

Good exits are what we guide our clients to achieve, and there are four sets of people to please on this journey.

Some buyer’s brokers focus on the gain for the buyer because that’s who pays them.

But Melo is different.

We’re paid by you – the seller.

So, what matters most to us is what matters to you.

How many business sellers exit happy?

How many business owners leave their business with a ‘high five’ to their team at the door?

Not many!

According to some business-sale experts, when you look at small and medium-sized businesses across all sectors, around three-quarters of owners regret selling their business a year after the sale.

Three quarters!

For many, there’s some emotional pain in losing control of a business they’ve built and love.

And, unless the owner continues working in the business after the sale, there’s the loss of contact with the team to consider, too.

Of course, with a good exit, there’s less emotional pain, and it soon fades.

But those pains can be extreme if the new owner ruins what you’ve built.

Apparently, across all sectors, most small business owners liquidate their firms, give them away or work until they die.

While more than 90% of sellers do not receive as much money as expected from the deal.

We think these are disastrous statistics, and thankfully, they’re nothing like ours!

More than 90% of Melo clients achieve a good exit at the first attempt.

And the number is nearer 100% when we include those who, for good reasons, need to enter a second round.

We’re told there are many reasons for this success, but perhaps the biggest reason is that the team at Melo are financial planners, too.

So, in line with Stephen Covey’s guidance (From ‘The 7 Habits of Highly Effective People’), we begin with the end in mind.

We want to know what matters to you.

What do you want for your future?

And what’s got you thinking about an exit?

Are you looking to escape from this sector?

To be honest, we understand if you’d like to escape!

Yes, we love how financial planning transforms people’s lives  – both for the long term – and in the near term to insure them and their families from financial disasters.

But we can’t recall when so much regulatory pressure was applied to this sector at one time.

On top of your day-to-day business management and marketing – you’ve recently had to absorb and act on the following.

• More demanding rules around the treatment of vulnerable customers.
• A new Consumer Duty with four significant sets of demands around: Products and Services, Price and Value, Consumer Support and Consumer Understanding.
• A thematic review of the Retirement Income Advice market.
• The New Sustainable Investment disclosure requirements – to understand clients’ sustainability preferences and recommend suitable funds.
• A new Senior Managers and Certification Regime (SM&CR) with annual checks on the fitness and propriety of senior managers.
• An ongoing review into Consolidators of advice firms with the FCA already acting to stop business expansions where they see risks of consumer harm.
• The ongoing charges review and the need for complete evidence that proper ongoing services are delivered.

And that’s not an exhaustive list.

You must also now decide how to react to the new (potentially low-cost) targeted support services proposed in the FCA’s Advice Guidance Boundary Review – which signals the FCA’s determination to reduce the advice gap.

And that’s on top of all the other PESTL challenges around:

• Political change and the upheaval around new tax rules.
• Economic factors like stubborn inflation, higher risk-free rates and risks to asset prices.
• Societal and cultural factors – like demographics, mistrust of advisers among spouses and adult children of wealth holders, lifestyle changes, and consumer behaviour.
• Technological change – and the explosion of new, AI-powered tools that could transform the productivity of advice firms but require money and time for adoption and training.
• Legal changes since the 2024 election have added Day-One Unfair Dismissal Protection, Fire and and-Rehire Restrictions, Enhancements to Statutory Sick Pay, Flexible Working and more.

So, we really do get it.

The environment is hard for advice firms now.

And this hard environment has driven business buyers to demand more information from sellers upfront, too – making the exit process much harder than it was only two years ago.

What does all of this mean for you?

Well, we would say this, wouldn’t we…

But there’s no question that you need a strong team (on YOUR side) to help you navigate the many tripwires around your business sale.

To land a good exit for all the stakeholders, you need plans, documents, and data to show that your business is ready for sale.

And you’ll need help preparing all that – and smart pitch packs, finding buyers that could be a good ‘fit’ to your business culture and values – and to help you negotiate the best deal possible.

As Jim Collins said – in ‘Good to Great’:

“You are the bus driver.

YOU must decide where you’re going, how you’ll get there, and who’s going with you.

Most people assume that great business leaders start by announcing where they’re going—by setting a new direction or articulating a fresh corporate vision.

But leaders of companies that go from good to great start not with ‘where’ but ‘who.’

They start by getting the right people on the bus and in the right seats – and the wrong people off the bus!

And they stick with that discipline (first the people, then the direction) no matter how hard the circumstances.

In short, you need a very good team to enjoy a good exit.

You don’t want anyone hassling you to hurry a sale,  as some brokers do.

You need time (and sometimes years of it) to prepare your business for sale – to ensure your data is accurate and accessible, to understand the acquisition landscape, and to make any business process improvements that could significantly boost your business value.

We can certainly help with all of that – and more.

And while we understand if you’re stressed by any or all of the above, we urge you to avoid making a dash for the exit.

Rushing this process will only increase the risk that you’ll join the ranks of those who leave without the right money – and with other regrets.

Do you dream of doing something different?

Do you have another project to work on?

In an ideal world, your business will be on top of all the challenges outlined above.

And occasionally, we find such a business -though those cases are rare.

Still, every business owner surely wants to automate (and delegate) enough of their work to feel less need for an escape and have more time to focus on what they’ll do in the future.

So, what are your dreams for your next stage of life – after you exit your business?

This is the question that you and your advisors ask your clients every day, right?

But how much time do you set aside to consider that question fully?

How clear would you say YOU are on what you’d like to do later?

Do you see yourself staying close to financial planning – as an educator, trainer, writer or guide to others selling their business?

Or as a guide who works with families wrestling with the thorny and emotional issues of generational wealth transfers or perhaps to advise on mindful Philanthropy?

Or, perhaps, to quote Monty Python, you’re planning to do something completely different – like running a Vineyard or buying a business which restores vintage cars, sells antiques, manages big events.

Or maybe you’ll buy into and advise other growing businesses as an Angel Investor?

Or perhaps your dream is to open a beach bar on a Greek Island. 

There’s a vast range of options.

Perhaps you already have a special project – and just need more time to progress that.

Some business owners we meet are in that position as they move towards retirement age or an earlier exit from their business.

But many are not, and a full-stop retirement doesn’t always deliver everything everyone dreams of when they plan it.

What makes for a happy life in our later years?

Riley Moynes has some interesting ideas – based on his experiences and interviews with hundreds of retirees.

This former financial advisor suggests there are typically four phases of retirement:

First comes the Honeymoon Phase – a period of excitement and leisure activities.

Then, we hit a period of disenchantment in which we may become bored or depressed due to a loss of purpose.

Next (if we survive phase 2!), we reach what Riley calls the Reorientation Phase, in which we experiment with new activities and interests.

And finally we gain ‘stability’ as we establish a new routine and find long-term satisfaction.

It’s an interesting model, and Riley has a delightful way of explaining it, as you can see here.

That said, we’re not aware of any academic studies to suggest everyone goes through all of those phases.

Each of us is unique in how we react to life’s challenges, and, as you’ll know, it’s essential to remember our uniqueness – when considering our future life plans.

So, there are no golden rules about our golden years.

The formal research on happiness in retirement shows mixed results:

A Harvard Study found that socially connected retirees who find new sources of purpose tend to be happier.

Another study dispelled the myth that we’re happier with a gradual (vs. abrupt) journey into retirement. (What matters more is whether the transition is chosen or forced)

And, while studies find that later years working boosts happiness, the outcome depends on whether we’re working for personal satisfaction rather than financial necessity.

In summary, for now, in terms of happiness after work (and we may come back to this topic), we know that maintaining social connections, finding new purposes, and feeling control over retirement transition are all key factors.

In our view, it’s wise to discover the happiness challenges around stopping work before you do so.

Sadly, this is not what most people do – and many sleepwalk into this challenging period of life.

So, in the next insight, we’ll explore why this happens.

We’ll see why most of us are terrible forecasters of our futures: what might make us happy and how we’ll react to significant life events.

And we’ll share two evidence-based ideas to help you overcome this classic planning trap.

We think you’ll be fascinated by these ideas – and they may also help your financial planners to build closer relationships with your clients.

See you in that next post – when you’re ready for that.

In the meantime, to learn more about how we can help you navigate your way safely through the whole business exit process, email hello@melo.co.uk or call us on 0113 4656 111.

And thanks for dropping in.