Many entrepreneurs ask us this question. Their business is doing well, growth is strong, dividend is increasing, so why now? “May be we will consider an exit in a few years’ time!”
Our answer is that it is entirely up to you when and if you choose to exit or part exit from your business. However, some key considerations are: tax rates, cost of borrowing, your expected growth, external market factors (e.g. regulation), acquisitions level, time to exit and how long you wish to work at your present rate. At this time the cost of borrowing is at a record low. Large companies are being pushed to grow through strategic acquisitions and they have the cash available to do so. The entrepreneur’s relief affords you a 10% tax rate for each shareholder on the first £10m. Any or all of these factors could change in the future.
Regarding the Mark Mills partnership in particular, we have a track record of achieving significant premiums for our clients. On average we secure a sale within 18 months which would have taken the entrepreneur 9 years of work and dividends to achieve. They then have certainty of wealth now and the freedom to do as they choose. A typical example is shown below for a recent client. In this example the shareholders were getting a total dividend of £620k in year 1 and we projected this rising to £2.2m by year 9, giving an average across the 9 years of £1.38m/yr. We sold the business after 12 months for £12.5m at a premium of 45% and the owner and his partner received their reward at a tax rate of 10%.
It usually takes between 12-18 months for us to assist you to prepare and then sell the business. We carry the burden of the entire sales process so that you are free to run the business and keep it moving forward. If you are thinking of exiting in the next “few years” then now is the time to talk to us; there’s no time like the present to plan for your future.