Four steps to exiting your business
What’s been the most emotionally-charged moment of your career so far? For many, it will be when their talent, skill and abilities are crystallised in the profitable sale of their business.
It seems that British entrepreneurs would certainly agree – the UK has the highest exit rate for start-ups across Europe, according to data covering the last decade, followed by those in Germany and France1.
One reason might be the tax breaks on offer. Currently entrepreneurs can claim relief on up to £10m of capital gains when selling their business, although this may be scaled back in the forthcoming Budget2.
For some, financial considerations such as this might make now a good time for a strategic exit. And as private equity businesses currently have more cash to invest that ever before3, the opportunities to make a sale – for the right business – could be appealing.
However, selling your business can be a life changing decision, with many entrepreneurs describing conflicting feelings of both elation and loss. When embarking on an exit, we’ve dissected the four key stages you will need to navigate.
Making the right decision
Despite many incentives, just 4% of SMEs are considering selling, passing on or closing their businesses in the next 12 months, according to a recent survey4. That’s a clear indication of the appeal that running a business holds for many.
A founder has usually devoted blood, sweat and tears to their business. Therefore, it’s understandable that they’re attached to it, and likely to have a sense of trepidation about what comes next.
It’s important to recognise this, so a founder can put their emotions aside and consider what’s best for the business over the longer-term.
Amit Patel, CEO of pharmaceutical firm Atnahs, sold a majority stake in the business to Triton, a European private equity fund, last year. “The company is something I hold very close to my heart, but we were selling a majority stake with the view that it was for the right reasons – to take the business to the next stage of its evolution.”
Moves such as this can help to unleash latent potential. “We had plenty of support from Barclays Investment Bank in helping us to find external enquirers,” Patel said.
Putting the right plans in place
There are many factors that can prompt an exit – foreseen and unforeseen. Even if you’re not planning to sell, it’s good practice to be prepared for it.
That can include addressing potential problems in advance, such as having an effective succession plan or doing due diligence on potential investors. Many entrepreneurs want to be confident that they are leaving the business in the hands of someone they can trust to look after it. Sales can often fall through without this.
It can also be important to make sure the business is in good shape behind the scenes, so you can be ready to go if an attractive opportunity arises.
When it’s time to make the move, Rob Agnew, Managing Director, High Growth Fin/Tech Founders and Investors at Barclays Private Bank, stresses the value of robust financial planning to maximise the gains.
“Ask questions such as whether you can claim entrepreneur relief, and how moving equity around can underpin a successful exit for the seller,” he says. “Often the earlier this planning process starts, the more can be done in the business owner’s interests.”
Being honest about the kind of exit you want
One of the elements of a successful exit, from a personal perspective, is understanding how involved you still want to be.
Entrepreneurs often report a huge sense of excitement from selling their business. “A sale is the ultimate validation of sleepless nights and unflagging optimism – it proves your idea has value,” explains Bradley Howard, Private Banker for High Growth Fin/Tech Founders and Investors at Barclays Private Bank.
But that feeling doesn’t always last. Patel says that he felt a sense of pride and achievement, but – despite staying on as CEO – says he woke up the next morning thinking “oh no. What happens now?”
“After selling a business, some individuals know what they want to do with their life and have a range of other businesses with which they are involved in or would like to start,” says Agnew.
“Other individuals need time to find themselves and a new purpose in life – be that in business, philanthropy or simply enjoying downtime with their family.”
There are many options for entrepreneurs, ranging from being an advisor to retaining a senior management position – perhaps for an agreed term. Others will want to leave immediately. But taking the time to really consider this in advance can help ensure a sale that’s right for everyone.
Planning your next move
A successful business sale is one that leads to long-term fulfilment. That can often mean deciding how to proceed with the next phase of your career as part of the process.
So if you are making a clean break – what’s next? By their very nature, entrepreneurs can find it hard to stop and do nothing, and it’s important to realise this in advance. Be prepared to miss the rush, but stay focused on your long-term goals.
“Take the time to unwind after the event,” says Howard. “Regularly review your personal objectives and strategy. This takes time, effort and discipline, and helps avoid holding proceeds in cash for extended periods while you decide on the next phase of your life”
A trusted private banker can give valuable investment support, for example, by looking at what interest can be leveraged through the Barclays Group.
Agnew often helps sellers to find meaningful ways to use their money, including mentoring companies, impact investing and philanthropy. “All of these involve intellectual curiosity, not just returns,” he says.
Entrepreneurs often benefit by managing decisions in the next phase of their life as if it were another business and many people who sell their businesses often set up another enterprise but, “even seasoned entrepreneurs need help in safeguarding and managing their assets”, says Agnew.
“Wealth brings responsibility, which today is often highly regulated, so being efficient about this task is essential. Capital management is a fact of life for anyone with wealth. Founders are advised to recognise this necessity early on and prioritise really identifying a banker relationship and banking platform that can help them manage their capital,” he adds.
In the post-Lehman Brothers era, the days of untraced movements of capital or simple storage with multiple banks are gone. Agnew suggests there has to be a clear partnership approach, strategy and direction in all dealings with capital to cope with multiple factors – asset allocation, optimising returns and diversification, alongside the burden of regulations required by global financial and fiscal institutions.
At Barclays Private Bank, we offer wide-ranging support to entrepreneurs, from planning personal goals to investment guidance.
Our global network and connections with the Barclays Corporate and Investment Bank mean we’re able to support our clients’ long-term goals. We can support entrepreneurs looking to move into new fields or disciplines, helping you to go further.
For more information, contact your Private Banker.
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