Exit Planning for Tech Founders

At some point, every tech founder will leave their business. The question is not whether you will exit — it is whether you will be ready when you do. The most financially rewarding exits are almost never put together quickly.

Why timing is everything

Exit planning is the process of preparing your business and your personal finances for the day you step away. That might mean a trade sale, a management buyout, bringing in a private equity investor, or passing the business to a co-founder.

The most tax-efficient exits require structures that must be in place well in advance. Business Asset Disposal Relief (BADR) which reduces Capital Gains Tax to 10% on the first £1 million of qualifying gains requires you to have held at least 5% of shares for a minimum of two years. You cannot arrange this retrospectively. A preparation window of two to five years is not cautious; it is realistic.

How buyers value tech businesses

SaaS businesses are typically valued on a multiple of Annual Recurring Revenue (ARR) commonly 2x to 8x, depending on growth rate, churn and gross margin. Traditional tech services businesses are valued on EBITDA multiples, generally in the 4x to 8x range.

Buyers reduce their offer or withdraw entirely when due diligence surfaces problems. The most common issues in tech business sales are:

• Revenue concentrated in one or two clients
• Key-person dependency where the business visibly cannot run without the founder
• Intellectual property not formally assigned to the company
• Customer contracts with unfavourable change-of-control clauses

None of these can be fixed overnight. That is precisely why exit planning must start years before a sale.

The key tax reliefs available to founders

Beyond BADR, Enterprise Management Incentive (EMI) schemes allow founders to grant share options to employees with significant tax advantages and help retain key staff through a sale. Setting up an EMI scheme takes time and requires HMRC valuation; it cannot be done at the point of sale.

Deal structure also matters. Most founders prefer to sell shares, which attracts CGT at 10–20%. Buyers often prefer an asset purchase, which typically results in a higher combined tax burden for the seller. Understanding this distinction and negotiating accordingly can be worth a significant sum.

What to do now

The practical steps are straightforward, even if the timeline is long. Clean up your financial records. Ensure all intellectual property sits within the company. Reduce founder dependency by documenting processes and strengthening your management team. Review your cap table for any unresolved issues with shares or options.

Then speak to a specialist accountant not when you have a buyer interested, but at least 18 to 24 months before you intend to go to market. By the time a buyer is at the table, most of the valuable tax planning opportunities have already closed.

Exit planning is not something you do when you decide to sell. It is something you do while you are still building.

For tech founders, strong financial planning is just as important as product development.

Through our specialised IT & Technology Accounting Services, YRF Accountants

supports UK technology businesses with tax planning, financial reporting, and long-term exit

readiness so founders are prepared well before any sale discussions begin.