Selling in Stages: When a Phased Exit Makes Sense

Not every business owner wants or needs a complete exit on day one. For many, a staged exit can be a more practical, more valuable, and less disruptive way to secure their financial future. A phased sale allows an owner to reduce risk, release capital, and bring in a partner while still retaining a role, influence, and continuing share of the future upside.

At BusinessExits.co.uk, we often meet owners who are not ready to walk away but want to begin de risked succession planning. A phased exit can be the right solution when handled carefully and with the correct partner.

What a Phased Exit Actually Is

A phased exit is a structured process where an owner sells part of their shareholding now and the remainder at a later agreed point. It is commonly used when:

• The owner wants to release capital without stepping away immediately

• The business requires new investment or skills to continue growing

• A buyer sees strong potential but wants the founder to stay involved

• The owner wants to lock in a future exit at a higher valuation

In simple terms, it is an exit journey rather than a single event.

Why Many Owners Choose a Phased Exit

For owners who have built their business over many years, a full sale can feel abrupt. A staged approach offers clear advantages:

• Immediate financial security from an initial sale

• Continued involvement and control during the transition period

• A second payout that can exceed the value of a full sale today

• Time to hand over responsibilities in a controlled way

• Reduced pressure on the management team and staff

It allows owners to secure the rewards of their work without walking away before they are ready.

How a Phased Exit Works in Practice

There is no single template. The structure is tailored to the circumstances and objectives of both sides. The typical phased exit includes:

1. Initial Sale of Shares

The buyer invests to acquire a minority or majority position. The seller releases capital but continues to hold a meaningful stake.

2. Defined Timeframe

The parties agree how long the seller will remain involved. Common periods range from two to five years.

3. Incentive Mechanisms

Future payments may be linked to performance. This could include profit based measures, growth milestones, or a future valuation mechanism.

4. Final Buyout

At the agreed point, the remaining shares are sold. This often provides the owner with a premium value because the business has grown under the new structure.

A phased exit works best when the structure supports collaboration rather than confrontation.

When a Phased Exit Makes Strong Commercial Sense

A staged exit is particularly effective when:

• The owner wants to reduce risk but stay for a transitional period

• The business has strong growth potential that a new partner can unlock

• There is a need for investment without the owner taking on additional debt

• A management succession plan is developing but not yet complete

• The owner wants time to prepare for full retirement

If the timing is right, a phased exit can secure a higher total return than a one time sale.

When a Phased Exit Is Not Appropriate

A staged exit is not the right answer for every situation. It may be unsuitable when:

• The owner wants an immediate clean break

• Buyer and seller have conflicting visions for the business

• The business is distressed or underperforming

• There is no clear second stage exit mechanism

• Trust and alignment are lacking from the outset

A phased exit only works when both parties share a clear long term commitment.

Benefits for Buyers and Sellers

A staged exit aligns the interests of both sides. For sellers, the benefits include:

• Capital release without full departure

• Opportunity to earn more through a second exit

• A smoother transition for staff and customers

• A partner who can help drive the next phase of growth

For buyers, the advantages include:

• Retention of vital knowledge and leadership

• Reduced risk of performance decline after completion

• Strong alignment between the original owner and the new investor

• Greater confidence in long term business stability

Both sides share the risk and the reward.

A phased exit is a powerful option for owners who want flexibility, financial security, and a route to a higher value future sale. When structured with care and supported by the right partner, it can be the most effective way to protect your legacy while maximising your return.

If you are considering a staged exit or want to explore whether this approach is right for your business, we are always happy to discuss your options in confidence.

Contact us today.