Starting a business is a very exciting time with lots to plan – how you attract your first customers, how quickly you can outperform your competitors, and how you will find the time to do it all?
With all the planning to grow your business, why should it be important to think about selling it? Surely that can wait until you want to retire?
Wrong! Every business should make a New Year’s resolution at the start of this year to think about the end of their relationship with their current business and what they want it to look like.
Business Angels make their money by buying and selling businesses, and many are successful entrepreneurs themselves. One of the first questions they will ask before they invest their money is how will they exit? Some even joke that they walk in to a room backwards so that they always know where the exit is. Lessons that can be learned here:
- Identify your potential buyer – make a list of potential buyers or types of buyers, try to understand their strategies, what would attract them to buy you and what you need to do to achieve that.
- Plan your steps – consider when would be the best time to sell, what size business do you want to be, how should the business look and what steps you would need take every few months to move towards that.
- Take tax advice – we’ve seen too many businesses that are set up in a fashion that does not minimise tax. At its simplest, taking the right tax advice at the start could make a difference of 18% or more of the eventual sale proceeds. At its worst, it could prevent a sale happening altogether.
- Take legal advice – we’ve seen businesses that have not been sold because the buyer would have been exposed to too much risk. So it is important to take legal advice early to help structure your business correctly and commercially.
As corporate finance advisers, we love to help discuss exit planning early with our clients as it helps to build a better business plan and so improve the chances of getting the right funding to help their business grow.
So even if you do not have Business Angels currently by your side, thinking of the questions they would ask about your exit will help you improve your business and eventually create more value for you and your family.
Author: Steve Plaskitt, Tait Walker