Planning Your Exit from Your Business

5. Get the Basics Right

Sound management over several years will add value to your business and allow you to start an exit relatively quickly when the time is right.

5.1 Aim for a year-on-year increase in profits.

• Reducing profits to cut corporation tax liabilities may make short-term sense, but it could harm your business' perceived value.

5.2 Make sure accounts are in order and up to date, and give a true picture of the business.

• It pays to be ready for any due diligence you may have to go through later. Be prepared for it to be demanding

5.3 Check you comply with employment, health-and-safety and other legislation.

5.4 Look to expand your range of customers and suppliers.

• Over-reliance on a few key customers will undermine your business' value.

5.5 Aim to tie key customers, suppliers, staff and managers to long-term contracts.

5.6 Protect your intellectual property rights.

5.7 Look at your business property.

5.8 Maximise relief for capital gains tax (CGT).

• You may be able to claim entrepreneurs' relief, reducing the effective rate of CGT on up to £5 million of gains.
• Substantial holdings in investments could disqualify you from this relief. Avoid investing spare cash in property or the stock market, or leaving it in the bank.
• Since June 2010, higher-rate income tax payers are liable to pay CGT at 28 per cent. For those paying the lower income tax rate, CGT is charged at 18 per cent.