Exit Planning

24th January 2017

We have set up a specialist corporate finance team to offer bespoke services in exit planning, including assisting with:

  • Timing the exit:
    • To fit in with your personal goals.
    • To show a record (ideally, 3 years) of growing maintainable earnings and profits.
    • Having a three-year business plan in place which includes strong revenue and profit goals, along with corresponding plans to drive and support growth in areas of sales and marketing, product/service delivery and finance. This plan should estimate the size of the market opportunity and have forecasts for growth based on what extra resources or expertise a purchaser could bring to the business.
  • Exit tax planning , including, where relevant:
    • To ensure (consider advance clearance from HMRC ?) entitlement to Substantial Shareholdings Relief
    • To ensure entitlement to Enterprise Investment Scheme CGT exit tax relief.
    • To ensure avoidance of possible De-grouping charges.

  • Deciding whether you are selling the business as a self contained company (ie shares) or just the individual business assets (including goodwill). 
  • Creating the ‘ideal’ business for a purchaser:
    • Diversifying your customer base, so that no more than 15% of revenue is derived from your largest customer.
    • Creating a model where customers purchase your product or service more than once per year and pay up-front.
    • De-personalise the business model, so that you do not need to customize products, services or methodologies for individual customers.
    • Creating a business model where you product or service is easily teachable to your staff.
    • Supplying a product or service which is highly valued by your customers/clients.
    • Once you specialise in something, you can then hire specialist staff.
    • Make something unique about your process, so that you ‘own’ it when pitching.
    • Have a sales team of at least two, to create natural internal competition (these should be people who are good at selling products, not services).
    • Having a scaleable business.
  • Structuring the business to operate without you:
    • Establishing strong middle management. Motivate them with a long-term incentive plan. Only give away equity as a last resort.
    • Creating financial controls for post sale, when you are no longer involved. Setting up this structure will involve ‘systemising’ all of the aspects of managing the business, so that, one by one, they do not require your input and creating a long term financial incentive for key individuals to stay with the company.
    • Creating a ‘prospects channel’ where no more than 10% of new revenue is a direct result of your personal sales efforts.
    • The more the business can operate without you, the less likely that part of the sale consideration will be an earn out or deferred consideration.
  • Control over the occurance and timing of discretionary spends
  • ‘Tidy up’ the business:
    • Formalising existing customer, employment and other trading relationships.
    • Ensure all legal and tax compliance is up to date.
    • Eliminate potential deal-breakers (eg. ongoing litigation).
    • Cessation or splitting of loss making activities.
    • Remove ‘personal’ and ‘mixed’ transactions and assets from the business.
    • Ensure most efficient/saleable structure.
    • As most purchasers will try and structure the deal so as to fund the purchase price out of future ‘target’ profits, the balance sheet should be handed over in a condition that will be conducive to such finance raising.
  • Creating a culture which minimises staff turnover.
  • Optimising the ‘Picture’ presented of you on the public record:

    • Submitting full (instead of abbreviated) accounts at Companies House.
    • Improving the information that can be found on you through simple desktop research (your website, blogs, etc)
    • Ensuring that your accounts are prepared with accounting policies that are consistent with industry norms.
  • Preparing a ‘sale pack’, ready for purchaser due diligence.
  • Find an advisor for whom you you will be neither their largest nor their smallest client. Make sure they know your industry.
  • Strategies for attracting approaches from potential purchasers (try and create competition into this process).
  • Creating the sale team and documentation and preparing for a smooth due
    diligence process.

The earlier the grooming process commences, the better and the more robust the company will appear under future due diligence scrutiny. Instruct us to undertake this corporate finance work and you can rest assured that all of the multi facets of this complex area will be taken care of, to your best advantage. Experience, contacts and inside knowledge are the pre-requisites of good corporate finance advice.



 
Other items in Blogs
 
Victor Courdelle
15th October 2018 If HMRC Can’t Say, Who Can? – Records Required for ‘Cash Accounting for VAT’ Under MTD

Reference to VAT Notices 700/21, 700/22 and 731 suggests that a business using Cash Accounting for VAT under Making Tax Digital will be required to:- Maintain digital accounting records at transaction level: Keep a digital VAT account using Accrual accounting; Cross reference Monies Received and Paid against individual Sales and Purchase invoices within their digital…

Read More »

Thomas Carter
12th October 2018 How to choose a business structure

Are you thinking about setting up a business?  If so, one of the first decisions you will need to make is that of business structure. The main business structures are: sole trader, partnership, limited liability company, and limited liability partnership (LLP). Sole trader – This is the easiest set up, with very little in the way of red…

Read More »

Richard Alecock
11th October 2018 Why a start up business should complete a business plan

A business plan is a written document that describes your business. By committing your thoughts to paper, you can understand your business better and also map specific courses of action that need to be taken to improve your business. It covers objectives, strategies, sales, marketing and financial forecasts. A business plan can help you to:…

Read More »

Richard Alecock
11th October 2018 Making Tax Digital, VAT and newly registered businesses

All VAT registered businesses with a turnover over the current VAT registration threshold of £85,000 will be required to comply with the Making Tax Digital (MTD) record keeping and reporting requirements for VAT periods which start on and after 1st April 2019. Where a business is VAT registered but has turnover under £85,000 at April…

Read More »

Matilda Mawson
5th October 2018 Have you elected not to claim child benefit?

You may wish to consider the implication this could have on your state pension in later life. Following the introduction of the high income child benefit charge in January 2013 many new parents have decided not to make a claim for child benefit as their individual income is well above the threshold to be fully…

Read More »

Victor Courdelle
4th October 2018 Working With Award Winning Software

We are delighted to announce that two of our chosen software providers have just won national recognition in the 2018 Accounting Excellence Software Awards held in London on 20 September: Xero Accounts – Winner – Accountancy Excellence Awards 2018: Small Business Accounting Software of the Year, Practitioners’ Choice. Receipts Bank – Winner – Accounting Excellence…

Read More »