Exiting your Business: Maximise Value and Protect Your Wealth

The rocket propellant of venture capital investment can be a huge blessing. With careful financial planning – personal and professional – you can eliminate any possibility of it ever becoming a curse when exiting your business.

Planning to exit your business

If you’ve secured venture capital funding for your business, we salute you.

Your business is one of about 8,000 backed by VC funds – who have around £8bn in total deployed in the UK – and the data say your backers could be looking for their return in as little as four years.

Before you get to that point there are several things to get right – to make the most of your effort and ensure you simultaneously prioritise your personal wealth.

This is where a financial planner specialist in working with entrepreneurs comes in. They can help you balance professional and personal financial management, ensuring each has a plan, and that you do your utmost to accomplish your goals … and reset them appropriately when the facts change.

Optimising your enterprise for exit

Ideally your financial planner will have helped you to build and monitor a detailed budget. This is a 12–24 month financial model with conservative revenue and realistic expense projections. It will help you and your head of finance know your runway (namely how many months of operations your funding supports).

Planning like this will help to keep you scaling towards exit … ensuring you hit key metrics that increase your valuation when you most need it. Your valuation needs to come at a time when the business is firing on all cylinders, with your key metrics in a position most likely to attract buyers.

This also means the greatest possible operational efficiency. A buyer will want streamlined processes and high-quality data management. After all, they will want to conduct detailed due diligence and you will need to be transparent about everything.

As you approach that end point, perhaps the most important job is your cap table. Also known as a capitalisation table, this is a spreadsheet or ledger that details your equity ownership structure.

It needs to demonstrate who owns what – from common to preferred stock – and in what quantum. Who has voting rights and liquidation rights? And what’s the transaction history of each shareholder? Get this right and you’re a long way ahead in your preparation for exiting your business.

Lastly, it’s easy to focus on the work and forget to communicate the work. Engage appropriately with shareholders, employees, partners, investors and other audiences. The ‘no surprises’ rule is a good one to keep in mind.

Your own money

Engaging your financial planner as early as possible means you can agree and structure your personal plan. This lets it sit there in the background, working away, while you move forward professionally.

This process starts with as deep an understanding of your assets, liabilities and goals. Planning isn’t really possible without goal setting, so planners like us want to understand your softer goals – the dreams and wants – alongside the harder ones – your specific needs.

For example, you may need some time out after exiting your business, so you can reset and go again. How long will this period last and how will you fund it? Will you rely solely on your sale proceeds? What about your existing wealth? Is your wealth aligned to your short-term needs? Is it solely pointed at the longer term? Or a blend of the two … and, if so, what and when are those milestones or drawdown moments?

The questions don’t stop there. Your planner will need to help you identify the optimal assets in which to hold your money. They will press you to consider what all the evidence suggests is the most likely route towards success. They will help assess your tolerance for risk, your liquidity requirements and then wrap everything in tax-insulated products.

Above all, your financial planner can help you more inexorably towards your goals … especially in those dark moments when they perhaps feel out of reach.

This will all enable you to treat your VC investment like the rocket fuel it is – an injection that helps your business surge upwards – while you can nurture your own wealth with control, comfort and confidence.

If some or all of these issues sounds like things you could benefit from, we’d love to talk. We work with many entrepreneurs just like you and can apply our expertise to your specific needs. Please get in touch on 020 7467 2700 or at hello@firstwealth.co.uk.

This document is marketing material for a retail audience and does not constitute advice or recommendations. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.