ERDF

Ask the Experts : Planning for growth and Funding

07th

August

Category

Growth Service

07th

August

Category

Growth Service

Looking to sell your business? Pannone give us their top ten tips on how to make your company an attractive proposition for investors.

Looking to sell your business? Pannone give us their top ten tips on how to make your company an attractive proposition for investors.

There are great opportunities for brave businesses to take advantage of the continuing economic uncertainty and get ahead of the competition through expansion by acquisition. Finding investment, through venture capital, private equity or debt funding, is the key step in this process. With proper planning and sound management you can make your business a great opportunity for a prospective investor.

  • Consider the Management Team. Whilst the management may have concentrated on winning business through sales and cost savings, is the team in a shape to allow growth? Is it over reliant on the owners? Consider expanding management, for example by recruiting an interim FD to run the rule over the finances to see if there is anything a prospective funder would not want to see!

  • Protect what is yours! Your staff or third party contractors may have had a hand in creating the rights in bespoke software, designs, logo’s, know-how, patents. Make sure that any key IP is properly protected by getting formal assignments of rights in commercial contracts and in employment contracts.

  • What are your property arrangements? If leased, is the title registered; if owned by connected parties, as is often the case with small businesses, is there a formal lease in place? If not, deal with this now before a third party funder comes along with its own interests. If leased, have you made proper provision for dilapidation and redecoration costs required by the terms of the lease. Any potential costs and liabilities should be provided for.

  • Comply with regulations. Sounds obvious, but check if your business has complied with regulations, such as managing asbestos, health and safety, waste disposal, discharge permits, data protection registration.

  • Check your employment contracts and policies. Are your employment contracts up to date and in good order? A funder will look to see that your key staff have appropriate notice period and restrictive covenants. For owner managers in particular contracts are often not in place.

  • Manage shareholders Growth can often require a reorganisation of the structure of the business which will, without an agreement in place, require all shareholders to agree. This can be time consuming and difficult.

  • Manage debtors. Good management teams have been looking to manipulate their creditors and push payment terms to their limit and any funder will expect this, but keeping a regular check on debtors and making sure you know the reasons why payment terms are being stretched evidences the fact that you practice sound financial management principles.

  • Manage customers. Any funder will be keen to see a secure, regular source of income. Ideally this means longer term contracts with minimum commitments and clearly defined pricing. What about terms of business applicable to purchasing goods? Are you bound by buyer or seller’s terms – the difference can be allocation of risk, payment terms, product indemnities and liability issues. Check the position and try to ensure your own terms of business apply.

  • Records. Maintain and keep in order financial and taxation records, customer and supplier records and ensure that all contracts with third parties are in final form and properly signed off by all parties concerned.

  • Check the tax returns and have your accountant or FD look over the last couple of years. Have all benefits been properly accounted for and taxed appropriately under PAYE and NI? Common problems include expenses, mileage claims, benefits in kind, payment of regular dividends where directors have low salaries etc.

More information about the services provided by Pannone LLP can be found on their Hub partner page

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