Business Owners - Client stories: Henry Denne

SELLING TO EMPLOYEES: WHAT TO CONSIDER

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SELLING TO EMPLOYEES: WHAT TO CONSIDER

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Selling to employees - selecting the right wealth planner to help you do so

Henry Denne, a Wealth Planning Director here at Canaccord Wealth, tells us about the more unusual routes to exiting a business - and the importance of selecting an experienced expert to support you

When people think about exiting their business, they tend to picture selling it to a competitor, or perhaps a private equity firm. But, alongside these more traditional sale options, I'm lucky enough to have recent experience with supporting clients once they've come out the other side of two of the more unusual routes - a Vendor Initiated Management buy-out (VIMBO) and Employee Ownership Trust (EOT) Both are ways of selling to employees, and they allow the owner the opportuntiy to grow their business beyond their tenure. They can also help to turn their life's work into an ongoing income stream for themselves and their families.

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My understanding is that these tend to be relatively more complex transactions. What's also slightly unusual is that the owner remains involved with the business to a certain extent, although they may go from being in sole control to handing it over to the next generation. What's more, they will want to ensure the next generation is going to be successful, otherwise they won't receive their pay-out. All of this can be very challenging, which means there's a lot of importance placed on selecting the right people to take over - not least because you're effectively trusting them with your life's work and savings. The chances are that business owners can't do this alone - they need an external perspective and help and advice from independent experienced experts such as accountants or lawyers.

Remember that there are several different ways to exit a business beyond selling to competitors or private equity firms In fact, some owners look to sell to their employees and/or management teams However you opted to approach exiting, there's huge value in working with independent advisers who can offer expertise in this area Prioritisation can be tricky during an exit - consider thinking about what's immediately important to you personally and what you believe can wait - then run this by your personal wealth adviser Remember that while it's often advantageous to get a head start, it's never too late to begin any kind of financial planning.

In summary:

Selling to employees can be tricky - certainly more so than traditional exits - and the same can be said of picking the right advisers to work with after the event. Most business owners will need a team of professionals around them at this time. You'll have, as I've already mentioned, accountants and lawyers who might put forward financial advisers that they work with. And your bank may make suggestions as well - but what you wont' need is someone trying to sell you a standard product post-exit. This is where a totally independent, external approach can be invaluable. Any business owner who is exiting or selling will always need to be surrounded by expertise: they need people who have experience of what they are currently going through for the first time, and who will use their knowledge and background to give them an unconstrained opinion, appropriate challenge and a supportive attitude. By using my knowledge and experience, particularly after a more complex business sale, I will let the owners know what is available to them and what they might want to think about - all with their input and guidance.

The need for an independent approach with a fresh pair of eyes

It's a bit like getting a builder into your house. they could tell you about dozens of things that need fixing in various rooms, but you only want them to work and focus on one of them. I apply this way of thinking to my clients. I ask them to tell me what their immediate priorities are and then we work on those together. But if they asked me what else they should be thinking about, I'd put together a list for them. One of the phrases I most commonly hear from my clients is, "I wish I'd met you five years ago". And that's because there are allowances and elements of wealth planning that people could have benefited from if they'd known about them or been advised on them earlier. But I always keep in mind - and sometimes even share - my favourite proverb: "The best time to plant a tree was 20 years ago. The second-best time is today."

The challenge of prioritisation

In summary: