THE past month has been one of significant political exits. The UK voted to exit the EU. David Cameron exited No.10. Boris Johnson then exited the race to replace him. Nigel Farrage decided to step down from the UKIP leadership and in Northern Ireland time was called on Theresa Villiers’ role as Secretary of State.
The aftermath marked significant political and economic uncertainty, fluctuating markets and the effect of Brexit on Northern Ireland is yet to be fully comprehended. Arguably much of this instability could have been avoided had robust succession planning been in place.
Many business owners put in decades of hard work building up their businesses, only to throw away some of the value and potential rewards by failing to consider their own exit plan.
So what can Northern Ireland SMEs learn from the last month, and what are the key considerations for planning a successful business exit?
Firstly, there are a number of routes to exiting or selling a business – a trade sale, management buyout, family succession and for a select few a stock listing or IPO. In order to realise the maximum value there are a number of key factors to consider in any succession plan.
:: Put in place a strong management team - this will add value and assist in the sale process, providing a new owner with continuity and could even become a potential purchaser through a management buyout, often with financial support from private equity backers;
:: Implement robust systems - nothing can derail a sales process faster than inaccurate or incomplete information. Taking time to implement robust financial, IT and operating systems will de-risk the process and add value to your business;
:: Focus on improving profitability - the saying goes that sales are vanity while profits are sanity. When selling a business, a buyer will often attribute value based on profitability over sales. So focus on the business in entirety – continue to drive sales performance but keep your business lean and don’t overlook cost management
:: Consider your tax position - when selling or exiting a business you could be landed with some heavy tax liabilities. It is important that you have carried out your tax planning early and properly;
:: Add value by tying down key contracts and addressing potential issues - it is worth bearing in mind that a business with a diverse customer book, and one that may have contracted revenue is an attractive proposition to a buyer. Loose ends are a turn-off so tidy up outstanding tax enquiries or employment tribunals.
Timing and obtaining sound professional advice is essential. The best reason for an exit strategy is to plan how to optimise a good situation, not to get out of a bad one. So plan early, be patient, and if we take one thing from the past month’s political drama, perhaps it should be not to wait till you are in trouble to plan your exit.
:: Paul Prenter is director and head of the corporate finance advisory team at Belfast-based transaction and restructuring specialists KeenanCF
