Cash out now? – options for entrepreneurs

Entrepreneurs could be holding back the growth of their business and jeopardising their long-term financial security by retaining full ownership of their company and relying on its value to fund their retirement, according to Paul Taberner, a leading venture capitalist at Enterprise Ventures.

Enterprise Ventures wants to encourage more owner-managers to consider a two-stage exit process by selling a minority stake first, in preparation for a full exit later. Paul explained why bringing in an investment partner could re-invigorate many established businesses which would help to stimulate the economy.

“Our experience has shown that, where entrepreneurs can realise part of their investment, they often gain a renewed appetite for growth. Many owner managers see their business as their pension which they rely on selling to finance a comfortable retirement,” he said.

“From a personal point of view, tying up your wealth in one company, even if it is your own, is not always a sensible investment strategy. We only need to look back to the last recession, when many owners were forced to delay retirement or sell at the bottom of the market.

“From a business point of view, it may also hold back growth. Understandably, older entrepreneurs tend to be more risk averse – they have spent years building the business and don’t want to jeopardise it by embarking on aggressive expansion, or put their house on the line again by giving personal guarantees to raise finance.

“Entrepreneurs must rethink their exit strategy and finding an equity partner to invest alongside them is the ideal solution as it allows the business owner to share the risk and secure the future for their family, while retaining overall control of their business.
“In these situations we often see the entrepreneur gain a renewed appetite for growth. The added value that a venture capitalist can bring will also help to prepare the business for a future sale and maximise its value.”

Unlike some of the main banks, which are often reluctant to fund partial exits, Enterprise Ventures has funds which are able to do this and is keen to talk to entrepreneurs who might be considering this.

Enterprise Ventures SME Loans was launched in June 2015 and provides loans between £150k and £1 million to established and growing SMEs in all sectors and across all areas of the UK.