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It’s probably true to say that it’s not often you get in a car or board a train without knowing your destination. Planning your exit should not begin at the end – it’s something that successful business owners build in to their plans early in the journey. The sooner you start thinking about it, the more informed you will be about the process and the potential outcomes.
As you plan for growth and maturity, you should plan for the exit point. Say you are starting your business today, aged 35, and you know you want to retire in 20 years’ time. Being familiar with the principles of ‘exit’ will help you at the start-up, growth, maturity and ‘what’s next?’ stages. It will also help you to set achievable milestones along the way so that you can tell if your efforts are contributing towards a successful outcome at the point of exit.
If you have a goal to dispose of the business and want to achieve a target value, but you haven’t understood the basis on which businesses are valued, it’s unlikely that you will get what you want.
Understanding how an acquirer will value your business in broad terms will allow you to assess whether you are likely to meet your own expectations and, if not, direct you towards the routes you might take to improve the business and its value prior to sale. The closer you leave that assessment to the point of disposal, the less impact you can have on the outcome.
Preparing yourself for the exit process is also key to maximising value.
Getting the business in tip-top condition and ready for disposal is critical. Ensuring the business’s legal arrangements, accounting records and other critical documentation are properly validated and up to date is critical to transaction success, so give the business some thorough attention.
Understanding the current tax environment and monitoring its change over time will also help you to determine what your after-tax proceeds from a transaction will be. The current tax environment is generally favourable for those looking to exit their business, but that might not always be the case.
Your ongoing role after exit needs considering. There are often reasons why the new owners will want the previous owner to remain involved after the transaction, but this is mainly to ensure an orderly passage of expertise, knowledge and goodwill from old to new. Taking the money and running is rarely an option for all but a minority of businesses.
Exiting doesn’t just mean selling to a trade buyer; there are other opportunities and pathways.
You could explore a management buyout and stay involved to support the team, or you could look to pass the business on to a loved one and build a legacy.
While these routes may not necessarily be the best in terms of business value, either scenario may represent the optimum exit route for several personal or business reasons, so they should be explored.
Succession planning is something that we really enjoy helping clients to achieve, as it is the culmination of a lifetime of hard work. It is rare that one type of exit will fit all eventualities, so take the time to give this final process the careful and considered thought that is needed.
Written by Nigel Kimber
Much like the maturity stage, the ‘where next?’ stage keeps the idea of relevance at the forefront. When you look at large successful corporations such as Whitbread, you can learn so much from how they adapted and swapped beer for coffee. The people at the top of the management structure looked at what was ahead and moved in a different direction to a place where, it had been predicted, beans would outsell hops. They’ve since sold the business to Coca-Cola for a reported £3.9bn.
So what’s ahead for your business? If you hold a metaphorical compass in your hand, is north pointing to selling the business? Is south pointing to passing it on through the generations? Maybe to the east of you there is a management buyout or, to your west, a wider employee ownership through a John Lewis model?
‘Where next?’ in business really means asking yourself the questions that impact your structure and force you to take strategic and directional decisions.
You may have been in the mature phase for some time, and ‘where next?’ might mean passing the business on. Of course, this will lead to many questions, one of which will be “Who is going to run the business after you?”
Even though you think you may know it all by now, staying curious is essential at this stage: new ideas will keep you and the business focused and will help you flesh out plans for the next chapter.
This is the big picture bit – it’s where you survey the landscape around you. How is your environment changing, and how do you react to that? Do you have the vision and resources to do this?
Practical steps at this point include considering new products and new service routes, and looking to see where the world is going and what’s potentially ahead.
If you decide that selling is the most appropriate way forward, then move on to the final stage of our route map to find out more about planning your exit.
Written by Nick Paterno
When your business is mature, you know who you are, you’ve honed your style, you know what you like, and people recognise the unique brand or approach you deliver and bring to their lives (or businesses).
You’ve passed through the energetic emerging and growth phases – and you may have reached the full extent of your market. Now, the trick is to stay relevant, stay on trend and continue to appeal to your customers and clients.
You’ve now reached a stage of equilibrium, but that doesn’t mean stasis – you still need to keep moving forward.
There are still options for growth, but it’s a different kind of expansion from the one you experienced in the emerging phases. You may have reached market peak, but you could look to buy another business, consolidate, or merge to expand your base and presence.
You can look at more low-cost provision and customer loyalty, and ensure that this is effective and relevant.
In the mature phase of business, refinement is continuous when it comes to finance and accounting, HR, marketing, logistics, production operations and service delivery.
A mature business is not immune to change, and you risk putting it in danger if you refuse to look for growth in other areas and avoid refining practices and opportunities to innovate.
Research and development can help you realise further growth or move forward where you may have started to stagnate. You don’t want to become a Blockbuster Video – a market leader one minute and out of date the next with the advent of new technology. By taking time to keep up to date with new technology, you can consider the competitive advantages that come with using them.
Never stop exploring: look outside your current position and at completely different organisations and the way they solve issues. Ask yourself “Who are they inspiring? Are they using data differently? What can you learn from their journey?”
Written by Andrew Warren
Welcome to the ‘growth’ stage of your journey. You are starting to gather speed as you progress forward with your business. You have demonstrated that you have a workable product or service, you may be taking on extra staff to handle the higher workload, or you may be looking at new locations or production facilities to meet customer demand. You may even be earning more than you had dreamed of or forecast when you started up!
Perhaps the first question you need to ask yourself is “Do I want to grow the business?”
It’s important to look at where you want to be and take the time to do market research and check out the landscape around you: are you growing because of a particular opening in the market – or can you see an opportunity to scale up what you are currently doing?
There will often be multiple directions and opportunities available to a business, and it can be difficult to know which way to turn. Taking the time out of a busy schedule to reflect and consider the options and plan the right route will reap rewards in the end.
At this crossroads, check that the map you’re using is the right one for growth. It may be that your business plan needs to adapt to changing circumstances or you need to add more detail to some or all areas – the intricate contouring, if you like.
Take the time to consider what funding you may need to facilitate the growth:
With this planning in mind, the next step is to consider where the funding is coming from and when it will be needed. We regularly help clients in preparing and reviewing forecasts to ensure the needs of the business can be met and then consider the funding options available.
In addition, there can often be regulatory or tax changes to consider as a business grows that do not only relate to turnover or profit levels but can arise from other factors, such as staff numbers.
It’s all in the planning. If you take a moment to look up, take in the helicopter view, review the financial projections and ensure you have the resources you need to continue to grow, then you will find you know how to keep on track.
These are exciting times, and we are here to help you explore your options. Really examining the contours of your business map at this stage will help you on the right path to reap the benefits of growing a business.
Written by Tanya Hamilton
So, you have the idea, but you’re naturally plagued by doubts – can it be a business? Can I earn enough income to never be employed again? What if it fails? How do I pay the mortgage?
These are the dilemmas of every new business start-up, and, while starting up is not suited to everyone, those who do will derive hours of pleasure, sleepless nights, adrenalin and frustration in equal measure. It’s just like life, but maybe you’re more in control!
Everyone starts their business for their own personal reasons. Some will consciously set up their business while others evolve a hobby into a business enjoyed by others.
Now for structure – let’s turn this idea into reality. You’ll need a business plan. As the adage goes, failing to plan is preparing to fail. Don’t underestimate the business plan. It will give you stark reality as to whether your idea is a financially viable business – and it will give confidence to banks and financiers that you may need at some point.
Get the plan reviewed by a third party. Ideally, someone willing to critique without worrying about possibly offending. This is the time for truths.
And what about tax and business structure? It can be mind-boggling, and you’ll run through questions such as “Now the business is going to be me, right? My friend said run a business but make it a company. His friend said be a partnership, it’s better for tax. And his friend said be a bit of both.”
It’s confusing but – while important – tax shouldn’t be the driver at this early stage. Liability and risk are paramount and, in certain circumstances, a limited company may give you that extra layer of protection.
Seek advice at this point and let an expert guide you. An accountant will run through all options with you, detailing the pros and cons of each. Rest assured, you will have the final say as it’s your business.
The business plan will also help you to identify the initial costs you’ll incur to set the business up. Do you need premises? Have you got insurance? What form of technology will you use? Looking at accounting software, do you enter the cloud?
It’s all down to you at this stage, but you are controlling your own destiny – and this should empower you to give yourself the best platform to run a successful business. It will take time, money and effort, but at least you’re not employed anymore and chasing those dreams, right?
So, having worked through these questions and sought independent advice, it should now be obvious if you have a viable business and are in a position to trade.
If you have started, are you already generating income? Are you making a profit? Do you have money in the bank? Has your hobby crossed the line from something you did for pleasure into a fully fledged business?
Once you have decided upon structure, you need to register with HMRC. They will realise at some point that you are trading though their various tools and techniques, so it’s better that you inform them first.
Will you need to register for VAT? Will you be employing staff? Again, an accountant can help at this stage. They will have helpful advice about what you need to do and when. Don’t presume an accountant should only be seen once you have completed a year’s trading. If you have left it to that point, then you are not truly taking care of your business. Let the accountant ‘partner’ you in the early stages.
Starting out is the first stage on what is hopefully a long and fulfilling lifecycle that will provide you with immense satisfaction and financial reward. Good luck – and don’t forget your accountant. They want you to succeed just as much as you do!
Written by Andy Carey
Amelia: A level school leaver apprentice Studied: Business Studies, PE and Media Studies A Levels Studying: AAT level 4
It wasn’t until a friend mentioned accounting to me that I realised it was something I was interested in. University was an option for me, but I wanted to find an apprenticeship and experience a real-life work setting whilst learning and earning qualifications at the same time.
A friend told me about McBrides and after looking into their website and learning more about the firm, I realised it would be a good fit for me.
I’ve recently completed my AAT Level 3 qualification and move onto AAT Level 4 studying in autumn and then I plan to take a degree level qualification through the ACCA.
Many of my colleagues are similar ages, making me feel more welcome as we all have similar interests – it’s the best thing about working here! We’re all completing similar courses on our apprenticeship, which helps you feel confident and able to ask questions if you are ever stuck with work or studying as everyone has been in the same boat.
I really enjoy the balance between being local four days a week and travelling up to London once a week for college as it gives the best of both worlds. My time in the office makes college a lot easier as I’m seeing real life examples and learning new skills every day. It is so much easier to understand college due to carrying out the tasks at work, rather than ‘just learning’.
I would encourage anyone thinking about applying to be a school leaver accounts apprentice to apply for the role as it is the best way to receive a qualification, gain valuable work experience and earn at the same time.
McBrides is friendly – everyone is happy to help and always checking in on you, which makes for a lovely, safe working environment that I feel comfortable in.