Jeff built a very successful manufacturing business with substantial revenue. He had a deep desire for his son, Frank, to join him in the business and continue the tradition. Jeff was in his mid-sixties when he finally convinced Frank to join the company. Frank entered the company as a vice-president of operations and quickly developed a strong affinity for the business. After two year s o n the jo b, Fr ank l o ved the c o mpany and was a gr eat salesman but he demonstrated no aptitude as a senior level manager. Jeff received several nice offers on his c o mpany but el ected not to sel l because of his desire f or his son to carry on his legacy. Three more years passed and it bec ame painf ul l y c l ear Fr ank was not going to make it. Frank had become increasingly unhappy and left for ano ther jo b that was sal es o r iented. Jef f was seventy and facing the prospect of no successor generation and an increasingly competitive business climate. He eventually sold his company for 40% less than his offer of three year s pr io r . © 20 0 9 , Th e In f inite Gr oup
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Je f f buil t a ve r y s uc c e s s f ul manuf ac tur ing bus ine s s w ith s ubs tant ial r evenue . He had a deep des ir e f o r his s o n, Fr ank, t o j o in him in the bus ine s s and c o nt inue the t r adit io n . Je f f was in his mid-s ixt ie s when he f inal l y c o nvinc ed Fr ank t o j o in the c o mpany. Fr ank ent e r ed the c o mpany as a vic e -pr e s ident o f o per at io ns and q uic kl y deve l o ped a s t r o ng af f in it y f o r the bus ines s . Af t e r two year s o n the j o b, Fr ank l o ved the c o mpany and was a g r eat s al e s man but he demo ns t r at ed no apt it ude as a s en io r l eve l manag er . Je f f r e c e ived s eve r al n ic e o f f e r s o n his c o mpany but e l e c t ed no t t o s e l l bec aus e o f his de s ir e f o r his s o n to c ar r y o n his l eg ac y. Thr ee mo r e year s pas s ed and it bec ame painf ul l y c l ear Fr ank was no t g o ing t o make it . Fr ank had bec o me inc r eas ing l y unhappy and l e f t f o r ano ther j o b that was s al e s o r ient ed. Je f f was s eventy and f ac ing the pr o s pec t o f no s uc c e s s o r g ener at io n and an inc r eas ing l y c o mpet it ive bus ine s s c l imate . He eventual l y s o l d his c o mpany f o r 4 0 % l e s s than his o f f e r o f thr ee year s pr io r . © 2 0 0 9 , The Inf in it e Gr o up
2009, © The Infinite Group
© The Inf in it e Gr o up 2 0 0 9
Gerry Forris tal
© 2 0 0 9 , The Inf in it e Gr o up
© 2 0 0 9 , The Inf in it e Gr o up
2008© The Infinite Group
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!!!N O W
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© 2 0 0 9 , The Inf in it e Gr o up
© 2 0 0 9 , The Inf in it e Gr o up
© 2 0 0 9 , The Inf in it e Gr o up
© The Inf in it e Gr o up 2 0 0 9
Tim Dew
© 2 0 0 9 , The Inf in it e Gr o up
© The Inf in it e Gr o up 2 0 0 9 2009© The Infinite Group
Sole Trader
Company withEmployees
Company with Employees &
Niche
300£ K
1£ M
1£ M
75£ K
300£ K
300£ K
Nil
1£ M
1.5£ M
Turnover Profit Value
© 2 0 0 9 , The Inf in it e Gr o up
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© 2 0 0 9 , The Inf in it e Gr o up
© 2 0 0 9 , The Inf in it e Gr o up
© 2 0 0 9 , The Inf in it e Gr o up
© 2 0 0 9 , The Inf in it e Gr o up
2009© The Infinite Group
?What is a Succes s ful Bus ines s
© 2 0 0 9 , The Inf in it e Gr o up
© 2 0 0 9 , The Inf in it e Gr o up
© The Inf in it e Gr o up 2 0 0 8
People• They are
your greates t
as s et
Systems• They are
your key toleverage
Technology• Automate
the, routine
humanis e the
exceptions
Money• Makes it allhappen
Sales & Marketing• The bes t
mous etrap’ does n t always s e ll
the mos t
2009 © The Infinite Group
5 Keys to increas e the value of your bus ines s
© 2 0 0 9 , The Inf in it e Gr o up
Exit Planning
Richard Baird
• Tax implications of sale• Sale to a third party• Transfer of business to family• Purchase of own shares• C16 wind up• Calculations
Summary
• Gain subject to Capital Gains Tax• Capital Gains Tax up to 18%• Entrepreneurs relief for individuals• Non business assets• Substantial shareholding exemption• Potential balancing charge• Income Tax up to 50%
Tax implications of sale
• Cash consideration• Share exchange• Deferred consideration/Loan notes• Asset/Share sale• Stamp duty• Inherent Capital Gains on assets• Business splitting
Sale to a Third Party
• Capital Gain on valuation• Hold over relief available• 100% Business Property Relief• Value re-set on death
Transfer of business to family
• Retained profits• Advance clearance• Surplus cash• Limited future involvement
Purchase of own shares
• No buyer for business• Property requires to be transferred• Potential Capital Gains Tax @ 21%• Double tax charge
C16 Wind up
Proceeds £2,000,000Less costs £1,000,000Capital gain £1,000,000Entrepreneurs relief £ 444,444Net chargeable £ 555,556Annual Exemption £ 10,100Net taxable £ 545,456Tax @ 18% £ 98,182
Example
Proceeds £2,000,000Less costs £ 1,000Entrepreneurs relief £ 888,444Net chargeable £1,110,556Annual Exemption £ 10,100Net taxable £1,100,456Tax @ 18% £ 198,082
Example – Hold over
Shares transferred 18 months prior to sale when value was £1.5m
Beware if sold< 1yr
Fixed Assets £ 60,000Current Assets £100,000Current Liabs £ 60,000Net Assets £100,000Within Fixed Assets Property worth £900,000
Assets or CompanyAsset sale
Property £900,000
Cost/index £100,000
Gain £800,000
Tax @ 21/28% £203,000
Revised net assets
Net Assets £ 100,000
Prop uplift £ 840,000
Tax £(203,000)
Total £ 737,000
Offer £1m for assets or £800,000 for company
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