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Don’t fall foul of poor succession planning
Published August 2007
Getting the biggest pay out requires a strategy
It's never too early to work out your strategy for exiting your business. Sellers who haven't prepared typically get less for their businesses than those who do and in the worst of cases a buyer can’t be found.
Changes you need to make can't be achieved overnight, so it is crucial to plan.
Firstly, consider your strategy, can you add value to your business when you plan to sell? Should you be aiming to maximise shorter- or longer-term profits? Are you over-reliant on just a few customers?
Next, at what point do you think your business will be worth the highest value, given changes in your supply chain, competitor activity or technological advances?
Then there’s the matter of tax. Implementing a tax-efficient strategy to realise your investment in your business can take time to set up. Your company might need to make sizeable contributions to your pension fund for several years. Make sure any tax changes are factored into your plans.
Potential legal disputes should be resolved. If a shareholders' agreement or your company's articles of association states you must offer your shares to other shareholders before you can sell to an outsider, address this issue to prevent any possible delays. Agree who will take over personal guarantees. If the company leases premises from you, discuss the alternatives. Ensure all key agreements are in place.
Key workers must be retained for a good sale price. Clauses in customer or supplier contracts may give them termination rights if ownership changes - when will you talk to them, to make sure they'll do business under the new owner?
Advice should be taken on the different tax implications of selling company shares, compared to the sale of company assets - legally, selling shares can be generally a better option for the seller than selling assets.
Make sure management information systems, equipment and premises are in good order.
If you want to keep a stake in the business, you can restructure the company's finances. Increasing bank borrowings and selling some of your shares back to the company is an option.
If you would like to find out more about the services that we provide, please e-mail or contact us to arrange a meeting.
