There are 5.7 million privately owned businesses in the UK, but it is estimated that fewer than 10% of owners have made plans for their exit.
Starting a business can be a lifetime’s dream; making it successful requires hard work and determination. Every owner leaves their business eventually, so why not take the steps to exit on your own terms and maximise value!
It is never too early to consider exit planning; it is not a single event, but a tailored process and understanding it will help you maximise your financial return.
Before you retire or sell your business, you should:
- improve profitability, current and forecast
- enhance your company image;
- nurture and tie-in long-term clients and suppliers;
- build a motivated team – make yourself dispensable; and
- reduce risk and uncertainty.
What is your business worth?
It is important to know your company’s value. There are several valuation methods, the most common of which is a multiple of maintainable profits – a trusted adviser can work out the most suitable for you. Multiples depend on risk. Factors to be considered include:
- company size;
- sustainability of competitive advantage;
- growth and profit trends;
- dependency on business owner; business disciplines and practices; and
- industry sector; market/economic environment.
Companies with blue chip clients and reputable brand name will attract higher multiples. Intangible benefits, e.g. intellectual property, attract a premium.
- when you sell your business Entrepreneurs’ Relief (ER) may be available, reducing the tax payable on your capital gain.
- if you qualify for ER, up to £10m of lifetime capital gains (per shareholder) will be taxed at a 10% rate, rather than 20% (for higher rate taxpayers).
- to qualify for ER, you must have owned the business for at least two years. If shares are being sold, the individual must have, (for at least two years):
- owned at least 5% of the ordinary share capital and voting rights;
- been an officer or employee of the company;
- been historically entitled to 5% of the company’s profits and assets OR be entitled to 5% of the proceeds on a sale.
ER is not always available, but advance planning may improve your position. How the sale is structured will also determine how much of your hardearned value is lost to the taxman.
Hazlewoods Corporate Finance team are experts in helping business owners achieve their goals. We are the South West’s number one corporate finance adviser (Experian M&A Review 2018) and can help you achieve your goals while ensuring that your lifestyle, income and security objectives are met.
“Hazlewoods assisted me with the disposal of my family business and I would heartily recommend them. From the beginning of the process, right through to the end, they were extremely professional, diligent and responsive to any matters that arose.”
We strongly recommend you take professional advice before making decisions on matters discussed here. No responsibility for any loss to any person acting as a result of the material can be accepted by us. Hazlewoods LLP is a Limited Liability Partnership registered in England and Wales with number OC311817. Registered office: Staverton Court, Staverton, Cheltenham, Glos, GL51 0UX. A list of LLP partners is available for inspection at each office. Hazlewoods LLP is registered to carry on audit work in the UK and Ireland and regulated for a range of investment business activities by the Institute of Chartered Accountants in England & Wales.