Risk Mitigation for business owners.

Business is a risky Business !

Have you ever wondered why private equity and venture capital firm don’t invest in companies with less than £10 revenue? The truth is that from an investors point of view, it is just not worth the risk. Small businesses are about the most risky investment you can put your money into. So many things can go wrong and they are not very liquid, hence you cannot get you money out very quickly if you need it.

Position yourself as an Investor, if you have £1m to invest you can put it into a variety of diversified assets such as stocks, bonds, gilts and rents that can be bought and sold within an hour and still provide a decent income over the long term. So if you want to sell you business you need to de risk it as much as practically possible.

This can be done in many ways such as having a diversified client base, well structured payment terms and the correct corporate structure to protect you from litigation. During my negotiations with many business I regularly see trading companies with huge cash piles sitting in accounts earning no interest and more importantly totally unprotected from opportunistic litigation.

If you have a profitable company that has substantial cash reserves, you should at the baee minimum, have a separate holding company that any surplus cash can be paid as a dividend. This means that your retirement nest egg is safely protected in a separate legal entity should anything disastrous happen. You can then lend this money to your trading company with interest should it be required in the future.

In addition any property or other substantial assets can be held by other appropriate entities to ensure the assets you have built up over many years can remain protected. Of course all the above needs to be structured under the advice of your suitabley qualifyied advisors.