I was told by a mentor that all business owners will exit their business; either exit will be intentional and predictable, i.e. through a sale or retirement, or it will be unintentional, through an untimely death.
Either way, if you are a business owner and you haven’t yet considered your exit plan then below are legal nuggets that may add value to your business upon an (intentional) exit.
1. Contracts
At a recent business sales masterclass, Rob Goddard of Evolution CBS told us that the number one reason for a company wanting to purchase another business is usually for a strong client base.
Therefore you will want to ensure that all client agreements are consistently signed, either physically or electronically, and stored in a secure and systematic way, either in paper or online. You will also want to be sure that any standard customer terms and conditions are regularly reviewed by your team in line with changes to your business.
2. Intellectual property rights
If you do intend to sell your business then it is worth looking into whether you can register any trademarks, patents or design rights, since these tend to increase the value of the business.
In addition, your business plan, business model or any specific trade secrets (even if not registrable) may be vital to the running of your business and to your unique selling point. You will want to remember to sign, store and enforce any non-disclosure agreements with workers and suppliers and ensure that only key staff have access to certain confidential information.
Finally, if a non-employee creates your website or software for your Company then check whether you actually own the copyright, since if no agreement is in place then the copyright (or the website domain) may actually be owned by your web-designer.
3. Legal and tax planning
Get a tax expert and sales broker on board early to prevent unnecessary delays. Mr Goddard suggest that you speak with tax advisors to assess the capital gains implications of any purchase transaction as early as 2 years in advance of the sale.
A good lawyer will able to support you to be able to put all contracts and registrations in place as you build your business so hopefully there are no surprises when you come to sell. If you would like to take our 60 minute legal healthcheck to gain some pre-exit insight into your legal priorities, email us at admin@navistarlegal.com.
4. Progress, not perfection
Mr Goddard mentions that a business for sale can be more valuable as work in progress and perfection is not required; indeed some weaknesses (depending upon their nature) are useful to demonstrate an “opportunity for growth”. Therefore although you will want the systems, processes and procedures in place, you can leave some room for improvement.
If you want to learn more about exit strategy then meet us at our event “Building For Exit: A Business – Owner’s Guide to Grants, Getting Investment and Grasping the Law” in September (http://planningforbusinessexit.eventbrite.com).
Author:
Jo Rogers is a lawyer, mentor and the founder of NaviStar Legal. During her career, she has supported early- stage companies around the world to raise over half a billion dollars, sell and buy other companies and list on the AIM stock exchange.
In April 2012 she stepped out of the comfort of private practice law to launch NaviStar Legal, a company providing in-house legal support to small and medium-sized business owners at a price they can afford. Her vision is to create a tribe of next-generation lawyers that empowers businesses to grow and be successful through predictable, trusted and robust legal solutions.