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You are hereHome / Exit planning – preparation is a must!

Warren Baker Partner

22 Nov 2019

Many owners of small and medium businesses believe that their business is their pension, but most fail to maximise the value that they can achieve.

Many small and medium size business owners work really hard to build up their business and consider that it is their major asset after their house. Many believe that they will reach retirement and then sell it on, so creating a tax efficient pension pot. But what most people do not realise is that in order to maximise the value of the business they need to start planning many years in advance.

Below is a list of things that the owner should consider doing:

  • the owner needs to make themselves dispensable
  • ensure all the Intellectual Property in the business is properly documented and correctly owned
  • ensure that the accounts are accurate and there are no significant issues that could come back and bite
  • ensure all taxation is properly dealt with and up to date
  • undertake a pre-sale due diligence to ensure there are no issues that could affect the sale price
  • ensure that the shares in the company are properly distributed amongst the family to ensure the maximum tax relief
  • ensure that key staff have contracts and are properly tied in and consider if an employee share option scheme may be appropriate
  • ensure that the company has a register of all relevant contracts and these are up to date

The process for sale can be fraught with problems and planning is the key to ensure it goes as smoothly as possible and the maximum price is achieved for the business.

Indemnities and warranties can eat into the sale consideration so where these can be limited by ensuring the buyer is comfortable with the business, there is less chance that there will be clawbacks.

If you would like an initial discussion around selling your business and what you need to do, please contact us.