This article has been produced following the first session of the Ashtons Legal and Chadwicks Wealth ‘Strategic Exit Programme’ series, which explores how business owners can better prepare for succession, sale, and long-term value creation.

Why planning ahead matters

There is a large cohort of UK businesses where business value, workforce livelihoods, and founder legacy sit in the hands of one or two ageing individuals with no plan for what comes next. Nearly one in four UK companies have directors aged 60 or over. Of businesses listed for sale, only around 20% complete successfully. Most failures are not failures of demand, though. They are failures of preparation, and they can be addressed if owners start early.

The owners who achieve the cleanest exits started preparing three or more years in advance. This is not because the legal work takes that long, but because the commercial work does.

Reducing customer concentration, building a management team, tidying up governance and shaping the value story all take time – they cannot be retrofitted in the weeks before a buyer arrives.

Plan early and you control timing, structure and price. Plan late and the buyer does.

1. Quality of earnings

A buyer examines the quality of earnings: how predictable, consistent, diversified and transferable they are. This is where most price adjustments originate in due diligence.

The risks of over-relying on few customers

Customer concentration is one of the first issues any buyer raises. If your top three customers walked away, what would be left? Reliance on a small number of customers typically leads to a price discount. If contracts contain change-of-control provisions, a buyer may hold back consideration against the prospect of termination.

Practical steps: Diversify your customer base. Formalise client relationships through written contracts. Review change-of-control clauses. Introduce team members into key account relationships before any sale process begins.

Predictable, recurring revenue

How much of your revenue is under contract, on subscription, or reliably repeating, as opposed to one-off project work? Recurring revenue is rewarded by buyers because it is forecastable. Businesses with strong recurring revenue typically command higher multiples than those reliant on project wins.

Practical steps: Restructure pricing to emphasise recurring, contracted revenue. Document stability and renewal rates of existing contracts. Make this visible in your financial reporting.

Transferable revenue

How much of your income depends on you personally? If clients buy because of your relationships, the business is harder to sell. Buyers often respond with earn-outs or extended handover periods to keep you tied in long after completion. This erodes both speed and price.

Practical steps: Move client relationships away from you and towards your team. Document the processes currently held by you alone. Introduce clients to team members gradually, well before any sale process.

2. Building a management bench

Over 2.1 million UK companies operate with single-director structures. More than 630,000 directors have served 15+ years without succession planning. Leadership concentration is the norm in owner-managed businesses. It is also, on a sale, one of the most expensive habits to retain.

Moving back from the keystone role

A buyer needs confidence that the business operates without you, because you will be leaving. When you are the only senior decision-maker, buyers typically discount the price, demand longer handover, or walk away. Address this years in advance, not when the buyer is at the table.

Building operational resilience

Operational resilience comes through deliberate delegation: identify a second tier of management, give them genuine authority, and document the processes currently in your head. The aim is a business that runs through systems and people, not through you.

Practical steps: 

• Identify key decision-makers at the next level and give them real authority
• Document your processes and workflows
• Build systems so the business does not depend on your knowledge
• Review contracts, covenants and incentive arrangements for key staff.

Buyers want comfort that the management team is both capable and locked in. Well-drafted post-termination restrictions, EMI options, and aligned bonus arrangements help demonstrate that the team will stay after completion.

3. Innovation

Sale-ready businesses are not standing still. An innovation culture, even modest, signals you have runway ahead, not just a track record behind.

Developing an innovation culture

This can mean new products or services, better systems, smarter data use, or a refreshed approach to your market. The point is forward momentum.

Building the value narrative

This is the story of where your business has come from, where it sits, and where the next phase of growth comes from. This turns a financial valuation into a commercial one.

Buyers pay for the future, not the past. They will pay a premium for a business with momentum and a credible growth story.

Practical steps: Articulate your value narrative now, supported by data. By the time it appears in an information memorandum, it will be mature and credible.

4. Governance

Good governance underpins efficient operation, diversified leadership and culture. It enables a business to avoid serious hurdles in reaching a sale. Two areas repay early attention.

Are your governing documents fit for purpose?

The articles of association and shareholders’ agreement (or, if applicable, partnership deed) should be reviewed periodically. Documents drafted at incorporation rarely reflect how the business operates years later.

Common pitfalls: 

• Pre-emption rights that obstruct rather than enable a sale
• Drag-along and tag-along provisions are not fit for your exit
• Dividend mechanics and share class structures are out of step with your business
• Transfer provisions that obstruct rather than enable a sale
• Shareholders’ agreements out of step with articles
• Minority protections that no longer match commercial reality.

Drag-along rights are particularly important. Without them, a single dissenting shareholder can potentially hold up a willing sale or extract a ransom for their consent.

Critical point: Address these before a deal is on the table, when such discussions become harder. Doing so in advance provides leverage and certainty, whilst addressing it mid-transaction concedes both.

How the company is actually run

Owner-managed businesses can drift into informality: undocumented director loan accounts, family arrangements outside company records, decisions taken outside the boardroom, and personal expenses run through the business. There are two notable risks in this:

• Commercial risk: Each uncertainty and irregularity becomes a disclosure point in due diligence and a warranty exposure. Buyers will insist on potentially expensive fixes pre-sale and/or put the risk onto the sellers, and they will price accordingly.
• Personal risk: Directors owe duties under the Companies Act 2006 to the company itself and to all shareholders. Running the company to favour one stakeholder over others can expose directors to claims from minority shareholders, creditors or HMRC. These claims survive a sale and follow you personally.

Practical steps: Run the company for the benefit of all stakeholders. Keep the paper trail to demonstrate it. Document decisions properly. Keep personal and corporate finances separate. Ensure related-party transactions are recorded and at arm’s length.
This protects both the business value and the directors.

What to do now

If you attended the masterclass:

• This month: Review your top ten customers. What is your concentration risk?
• This quarter: Discuss succession with your management team. Who would step up?
• This year: Have a lawyer review your articles of association and shareholders’ agreement.

Next steps

This article forms part of the Ashtons Legal and Chadwicks Wealth Strategic Exit Programme series – an in-person, small group workshop programme designed to help established SME owners strengthen leadership, governance and long-term planning, and to build a more owner-independent, transferable business.

The programme consists of three standalone workshops. You can attend individual sessions or complete the full sequence for a more comprehensive view of succession, exit readiness and what comes next:

• Session 2 – Stress testing the engine (Thursday 4 June, 3.30pm–6.00pm)
• Session 3 – Transitioning the legacy (Wednesday 17 June, 3.30pm–6.00pm).

Each session is delivered in a small group format (limited places) to keep the discussion practical and focused. It is aimed at SME owners and directors who want to reduce key person dependency, strengthen resilience, and understand the steps involved in internal succession or a future sale, whether the transition is near-term or further ahead.

More information here: Strategic Exit Programme.