Planning to exit your business?

Our Wealth Planners can help you get the most value when you leave your business

27 January 2022

3 minute read

When the time comes to sell your business, you only get one shot at cutting the right deal, so it’s important to make it count.

To plan a successful exit and extract the value from the business you’ve worked so hard to build, Andrew Brown, Barclays Wealth Planner highlights some key things you must consider.

It’s all in the preparation

There are some core questions you might want to ask yourself as you start the process of your exit that will help with finding the right deal.

Why are you selling? What do you see yourself doing once the business is sold? You might want to make a clean break and invest in a new company or finally take that well-deserved retirement.

Alternatively, you may still want to be involved in your business. A sale will be more straightforward if you’ve already decided exactly what that involvement looks like. Will you offer a guiding hand or be a silent shareholder?

The structure of the sale is crucial, of course. Yet it’s the value of your business that will be the main event for most. A useful tool is to establish a personal ‘lifestyle number’ – the amount of capital you need to meet your lifestyle needs. This can focus your negotiations.

Working out what dealbreakers there might be on both sides will help you negotiate more effectively.

Under the bonnet of your business

Credible buyers will have a rigorous due diligence process that will unveil any discrepancies in your business.

Omitting seemingly small issues over accounts, record-keeping, contracts or business structure can derail a good deal, or reduce an offer on the table.

Equally you’ll do well to put yourself in the buyer’s shoes and pinpoint the risks which includes customers, suppliers, products or management as well as any outstanding debts – any buyer will endeavour to find this out.

Ensure your administration is squeaky clean. That means making sure that clients are invoiced, patents registered correctly, supply chains fully functioning, for example.

A buyer will pay close attention to cash flow, as this is the basis on which many businesses thrive or fail. If you have any significant contracts coming up for renewal, aim to lock these down so a buyer can feel confident in future revenues during commercial due diligence.

It can also be worth bringing in outside help to give an objective view on your business as a whole. They will be able view the business as a potential buyer would. Identifying problems before the due diligence process begins can be money well spent.

Finding the right buyer

Potential buyers of your business may have different ambitions for the future of the company. They will all be worth considering, yet finding the right buyer and the right fit is important for a harmonious exit.

You can make the sale process a lot easier by understanding the needs and motivations of your potential buyers.

Private equity or venture capital are the dominant method for entrepreneurs selling their UK businesses.

Offered terms will likely come with conditions, but those conditions are ripe for negotiation. Trade sales will usually involve a capped earn-out. A stock market flotation may be suitable for larger companies. Family offices or angel investors may be useful for smaller businesses.

Next steps

Planning for an exit is vital. Your Wealth Manager can put you in touch with a Wealth Planner who will be able to help you onto the right path to a successful and hopefully profitable exit.

Some questions to ask yourself could be: how much money do I need to retire? How much income can I draw? How long will my money last? Can I afford to make gifts to my family?

Crucially a Wealth Planner can help you to find answers to these questions by trying to build a plan for you, so that you can have a happy and comfortable post-exit life, and also give you perhaps the most important thing – peace of mind.

Speak to your Wealth Manager or contact us if you would like to arrange a meeting with a Wealth Planner to discuss your options.

Your Wealth Planner can help you understand the effect of tax on your wealth and offer tax-efficient wrappers for your investments. They’ll be able to guide you towards making the right decision for your financial planning needs. Your planner can't offer tax advice – you should seek that independently. Please bear in mind that tax rules can change in future and their effects on you will depend on your individual circumstances.

This article does not constitute personal financial, tax or legal advice. Each person’s circumstances are different so if you are unsure about investing, you should seek advice from a regulated adviser.

Things to consider

The value of investments can fall as well as rise. You may get back less than what you originally invested.

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