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Last Updated: Wednesday, 17 September, 2003, 17:41 GMT 18:41 UK
Knowing when to call it a day
Peter Ibbetson
By Peter Ibbetson
Head of NatWest Business Banking

After six years, eight out of 10 start-ups will no longer be trading
What happens when you want to wind down your business? BBC News Online asked NatWest's head of Business Banking to provide a few tips.

Going it alone is one of the biggest decisions that you will ever make and ensuring your venture is a success is definitely hard work, but can be very rewarding.

However, there will come a time when either you wish to leave the business or the business reaches the end of its trading life.

It is important to have an exit strategy for yourself and a plan for either the continuation or closure of the business.

So why do owner-managers shut down their firms?

Research shows that after six years, eight out of 10 start-ups will no longer be trading but surprisingly only 27% of those are due to financial failure.

Although setting up your own business is exciting and fulfilling, once the business is up and running successfully, some entrepreneurs feel the challenge has gone
Peter Ibbetson
The majority of financial failures can be attributed to a lack of basic financial skills.

Bookkeeping, accounting and managing profit and loss accounts can be confusing to the novice.

Owners need to ensure that both they and, where appropriate, their staff are fully trained with basic financial skills to ensure success.

Alternatively if number-crunching is not your strong point, there is help out there.

Your bank and accountant are there to help develop your understanding and provide guidance on financial control.

No longer a challenge?

With only a quarter of small businesses failing as a result of financial problems, there are obviously a number of factors affecting the managers' decision to shut down their firm.

One of which is boredom. Some people go into business for themselves as a result of becoming disillusioned by their nine-to-five careers.

PREPARING TO SELL
Seek professional support from an accountant and solicitor
Take advice from a valuer
Reduce business costs and excess stock levels
Keep employees informed
Although setting up your own business is exciting and fulfilling, once the business is up and running successfully, some entrepreneurs feel the challenge has gone and the boredom sets in.

Equally some entrepreneurs find the cash constraints a problem.

If they draw more money for an increase in their salary it can affect the profits of the business.

It is at times like this that the nine-to-five salaried job becomes more attractive.

New ventures

On a more positive note, some business owners are so happy with the success of their business that they diversify and open other small businesses and may eventually close down the initial venture.

This does not mean that they are leaving the sector but are actually investing more time and money in establishing many different businesses.

Emotions may run high and decisions made at this time might not be the best for you or your business
Peter Ibbetson
In addition, some entrepreneurs will inevitably reach an age when they would like to put up their feet and enjoy retirement.

This presents even more options. Do you close your business down, sell it on or employ someone, perhaps a family member, to run the business on your behalf?

In the majority of cases, most small businesses have a clear idea of what will happen to their business when they retire.

Just over a third expect to sell their business, 14% think that they will pass it on to a family member and 13% of small business owners expect that, in the end, they will close their business down.

However, you should ensure that you plan ahead to ensure that your idea becomes a reality.

So what do you need to consider?

The most important thing to remember when preparing to wind up or sell your business is to ensure that any decisions made are rational and objective.

Depending on the reason behind the sale or closure, emotions may run high and decisions made at this time might not be the best for you or your business.

You should also seek professional support from both your accountant and a solicitor who specialises in business conveyancing.

They will be able to provide you with financial and tax advice and the legal documentation needed to complete a sale or to pass your business onto another person.

If you plan to sell your business, your accountant will also be able to help you present your books for potential buyers and explain the tax implications of making the sale.

Before you put your business up for sale it is also important to take advice from a valuer, with knowledge and expertise in your sector, as they will be able to give you impartial advice about the real value of the business.

Checklist

There are steps that you can take in advance to prepare your business for sale, which in turn should improve your prospects of a successful sale.

You should consider looking at ways to reduce business costs, without cutting back on important expenditure and to reduce excess stock levels to improve the level of working capital.

Making sure that the premises and any equipment is well maintained is also fundamental when packaging your business for sale.

Finally and perhaps most importantly, it is vital to keep your employees informed about your plans.

They are an important asset and can give a good impression, which is crucial if attracting a potential buyer.


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