Preparing your house for sale can be achieved quickly, going for “kerb appeal” with a lick of paint, a tidy garden and a few pot plants. Internally clearing all the clutter, more painting… and the smell of baking bread can, apparently, be a winner!

Getting a business ready for sale takes considerably more careful planning. Having an exit strategy will get the business owner to think about their business from a much wider perspective. A potential buyer will take a long, hard look at a business often over the last 2 or 3 year’s trading. Of course ensuring that the most recent profits are maximised is very important, but they will want to be sure that this is a sustainable trend. The role of the owner will also be key, and a buyer will want to understand how the business performs without them. The second tier of management will often get a lot of attention from a perspective buyer to ensure that all the “goodwill” in the business doesn’t evaporate when the owner leaves. Management process and good housekeeping are also areas that take time to get right.

From a personal perspective the business owner needs to get his own affairs in order. Personal financial planning needs to be considered. How much money will the owner need to sustain his desired standard of living after the sale? Have the tax implications of the business sale, the owner’s investments and pensions been properly though through? The services of a well-qualified IFA/Wealth Planner are essential to get this area right.

So, all of these issues point to business owners taking a long term view of their exit strategy. Maybe a couple of years are needed to really get the business in shape and ready for sale. By working through an action plan that builds long term sustainable value into a business, the owner can be sure that he will maximise the proceeds of the business once he come to sell it.

Views?

BUT…. even if you have no immediate desire to sell your business, then thinking through an exit strategy is a great idea. Having an exit strategy in a sense forces business owners to stand back from their business and take a long hard look from the view point of a potential buyer. Too often, most entrepreneurs spend all of their time with the normal day to day fire fighting, but just occasionally they need to step back and see the bigger picture. The sort of questions they should ask themselves are:

• Is all of the businesses value actually in the owners own head? Could the business function without the owner’s constant intervention?
• Are they building long term, sustainable value into their business…. is there value in the company brand?
• Do customers return to them again and again? – recurring revenues are highly valued
• Are there enough processes to show that the business is well managed?

All of these are key questions when a business sale is imminent, but are also very relevant when a sale may be some way off. Owner managers have no problems working “in” the business, but they also need time to work “on” the business - in order to build it’s value.

Having a thought exit strategy also guards against the unexpected. If the owner is ill (or worse!) and unable to continue in the business, then how will the business survive? Or, what happens if someone comes in, completely unsolicited, and offers to buy the business?

So, to answer the opening question…. every business needs an exit strategy! 

Please let me have your views or experiences

In some cases, as there have been quite frequent changes in VAT percentages over the last few years, many businesses now have processes in place with dealing with the practicalities of the change. They are learning to deal with VAT in a more flexible manner, especially if they work with consumers. Updating your ecommerce systems, for example, to allow for VAT percentages to be adjusted easily can help. Your business needs flexible processes and robust systems that will save you time and effort, as the economy adjusts to the period of austerity.

Make sure you understand how the higher rate of VAT can potentially add strain to your cash flow. Businesses act as tax collectors for the government and there can be timing differences between the payment & receipt of the VAT on invoices – versus how you settle VAT on your return. Only consumers ultimately suffer VAT but timing can make a difference to a business.

Aside from those practicalities, is the VAT change all bad for small businesses? Although the Federation of Small Businesses seems to think so, reporting that 70% of their members expect the change to have a negative impact, when we work with clients we ask them to deal with these changes in a more positive manner.

As business advisors, we recommend using the VAT changes as an opportunity for promotion. Look at it as a chance to set up a price promotion offering benefits to your customers over a limited period of time. This change doesn’t just affect you, but your customers and all your competitors (if this is any consolation). We’re all in the same situation.

If this small VAT rise does make a difference to your business, your business may be struggling anyway. You may need to look at your processes and systems to see where efficiencies can be made. Look at your supply chain in detail, or your business model, to see where you could be going wrong.

Any changes you make in your businesses, if thought through properly, could have successful long term implications. You may even find it’s time for a complete re-launch, or a new growth strategy centred around a previously un-thought of market segment. If the changes are aligned to your personal objectives, and those of your business, you can focus the direction of your company and weather the economic storm.