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Planning for life
PARTNER INSIGHT: FINANCIAL
PARTNER INSIGHT: FINANCIAL
after exit PARTNER INSIGHT: FINANCIAL
& EMOTIONAL PREPARATION
& EMOTIONAL PREPARATION
& EMOTIONAL PREPARATION
Plan beyond the sale of your
There are two things that business owners
business to give yourself There are two things that business owners
need to consider when exiting a business: the
need to consider when exiting a business: the
Rob Douglas
options and time to make the Rob Douglas, proceeds they need to earn from a sale, and
proceeds they need to earn from a sale, and
Relationship
their emotional preparedness for selling. A
right decisions for you, your Manager, their emotional preparedness for selling. A
wealth manager can help a business owner
wealth manager can help a business owner
family, and your business RBC Wealth calculate how much they need to fund their
calculate how much they need to fund their
Management lifestyle aspirations and determine whether
lifestyle aspirations and determine whether
the proceeds from the business will cover all
the proceeds from the business will cover all
After the control and profile that comes individual and family future needs.
individual and family future needs.
with being the founder of the business,
members find it a major adjustment to There are emotional and psychological
There are emotional and psychological
step away. It requires psychological and challenges all business owners should
challenges all business owners should
acknowledge as they hand over the reins
emotional preparation as well as financial acknowledge as they hand over the reins
to their business. This can be particularly
planning. Prepare for your business to their business. This can be particularly
difficult if it is a private equity sale that
difficult if it is a private equity sale that
meaning less to you, and you meaning less ties them in for a few years and means
ties them in for a few years and means
to your business. making the adjustment from owner to
making the adjustment from owner to
employee – one that isn’t always easy. There
employee – one that isn’t always easy. There
The exit option you choose will be is an identity associated with founding and
is an identity associated with founding and
running a business. Losing that could lead to
determined by your financial goals and running a business. Losing that could lead to
a vacuum that needs to be filled. Attachment
personal motivations. It will also help you a vacuum that needs to be filled. Attachment
to staff and being concerned about their
decide if you want to stay involved with to staff and being concerned about their
future can also present challenges.
the business: as a non-exec, an investor or future can also present challenges.
in an earn-out.
EARN-OUT Nothing prepares you for leaving
Members have had mixed success with your business and losing that power
earn-outs. Unless you really want to be
part of the future of the business, or it’s base. It’s like climbing a mountain,
a partial exit, many find it difficult to be reaching the summit, finding nothing
working for a company without having and having to come back down.
the input or control they had before. It’s
not just the lack of control over decision Martyn Dawes, high growth business mentor
making, it’s the lack of input into the and founder & former CEO of Coffee Nation
culture, which you will have personally
invested a lot of time in.
If you need to do an earn-out, members MEMBER INSIGHT:
recommend that you negotiate a holiday BEING ACQUIRED
straight after the sale to help you Michael Kraftman, Founder, Vision Direct
adjust. Find out exactly what the buyer’s Some members
plans are for the business and what warn about I’ve spent the last 18
success looks like to them. Will they be keeping control of months working for a
incorporating your team straight into their the numbers. For boss, for the first time
existing structure, running it as a division example, ensure in my life! Although
of their business, putting someone else in sales from any I’ve sold the business
outright, there’s a
above you to lead it, or will it be ‘business new launches are management incentive
as usual’ for a certain period of time? Get considered as part plan which essentially
of the earn-out
to know the team you’ll be working with target and push ties me in for two years.
because you will probably be committing back if not as it
to at least two years with them. could make it It’s interesting, all the problems you used to
more difficult to have as a medium sized business go away
Future payments under an earn-out are achieve. Try to and they’re replaced by new problems. For
example, cashflow is always something to
taxed as capital receipts which are subject negotiate a period manage carefully in a medium business,
of control in your
to Capital Gains Tax and should qualify for contract to include whereas in a corporate that’s just not an
Entrepreneur’s Relief. If you remain in the new launches if issue; but there are politics to manage and
business, payouts could be taxed as bonus they will help you it’s harder to make decisions straight away.
payments and subject to income tax and hit your target Not easier or harder, just different.
national insurance, so get tax advice. sooner.