Ensuring a smooth exit strategy from a business can often be more fraught and complicated than expected, writes Jane Dudman.

There are many ways to leave a business. Some business owners aim to hand their firms over to their family. Few, though, would want to emulate the example of the unfortunate business owner in the Philippines, who last year filed criminal complaints against three of his children and a son-in-law for their alleged unauthorised sale, three years earlier of the telecoms company he owned at the time. That's something that's unlikely to happen - but it serves as a warning that all is not as it seems.

One of the main points that not all resellers take into account when thinking about their exit options is that this is not something that should be left to the last minute. As the Government's website for business puts it, the decisions you make when setting up can affect how easy it is for you to eventually exit your business (http://www.businesslink.gov.uk). Ideally, resellers should have included an exit strategy in their start-up business plan. It can be changed as the business develops, but it's a good idea to have an exit plan in mind as that will help the way the business is structured, from the ownership structure to property and partnership agreements and supplier contracts. Not everyone does this, it's a bit like having a business continuity plan... acknowledged as a good idea more often than actually executed. Nonetheless, starting to think about an exit strategy at an early stage and preparing the ground careful is a good idea.

"Resellers should include an exit strategy in their start-up plan"

There are four main exit options for most UK small businesses: Handing the business on to a member of the family; selling the business; floating the business; or closing the business. The final option is probably the simplest, but can also be more fraught than many expect. The principal objection to this strategy is that it can mean the existing owner fails to get the maximum value from their existing business. And it is important to ensure that any family member buying into a business has the necessary skills, including financial and management skills, to handle the business, which may not always be the case.

Flotation, particularly in the present economic climate, is unlikely to be an option for many resellers, particularly if they are smaller businesses. A successful flotation requires a number of factors, including a great business track record and optimistic financial markets. It also takes a great deal of time and effort, even when financial markets are doing well, so at the present time, is much more unlikely. So selling the business as a going concern and, hopefully making a decent profit, is likely to be the main aim for many comms dealer. There are a number of aspects to this process that require careful consideration.

Several organisations provide independent advice on preparing businesses for sale, including Business Link and the Institute of Chartered Accountants of England and Wales. Both these bodies advise businesses to use specialist advice, but it's important to have a clear idea of what needs to be achieved before getting too enmeshed in expensive legal advice. Background research is essential before proceeding with any business process and that is particularly pertinent in the case of preparing an exit strategy.

Getting a business into shape for sale is probably one of the most important aspects of business life. There are a number of companies out in the market still looking to make acquisitions, despite the current credit crunch. They tend to look for resellers with plenty of sticky customers, low levels of bad debt and a high average revenue per user (ARPU). Spiritel, for instance, which has bought several resellers in the past two years, emphasises that it wants to see a high proportion of customers on direct debit, which makes it easier for automatic handover (see page 16).

In general, resellers will probably aim to find a buyer with an existing interest in the telecoms market, who will understand their own business and are likely to therefore value it at an acceptable level to the seller. Another option is to sell either all the business or part of it to a private equity partner. Again, this is something where such buyers are more likely to be interested in buying into larger businesses.

Owners may feel that an exit strategy should be just that - a strategy that gets them out of the business completely. But this is to overlook the nature of many business sales, where the new owner will want to retain the expertise of existing staff and management. From this point of view, a deal where the owner retains a minority interest in their firm can be useful in providing a transition into a full exit from the firm, and a managed financial progress.

Telecoms is well-known for its rate of growth and much of that growth in the channel has been through acquisitions. Firms such as Azzurri, for instance, have grown enormously over the past few years through a keen acquisitions strategy. Those on the receiving end of a merger or buy-out over the past few years may now be looking at the changing nature of the market and the turbulence of the financial world and reflect on the benefits of a decent exit strategy, well-executed. For those still preparing their parachutes, preparation is key - and be careful, it can be a bumpy ride.