Entrepreneurs and ventures capitals have one basic idea on the back of their minds. Create a business from a great pitch idea, make it to work, make it profitable, sell it afterwards - or go public. Usually fast growing businesses have no attachment to specific customers or assets, no binding contracts or debt, so that in when the moment comes, it is ready to be packed as a product and be sold to someone else.
The different market of smaller businesses where there is a plentitude of parameters that will influence the final price, makes the challenge extremely interesting to nortb strategy consultants. When one of our clients, a chain of restaurants in Portugal announced that would like to stop the business, it was sad for us to listen that our work would come to an end, but still proud that they chose nortb to process the sale strategy and negotiate the sale.
Portugal and its legislation are some of the most beautiful and yet complex bureaucracy in the world. Setting up a business is not an easy mission in Portugal. Our client during 6 years has successfully set up a chain of 4 different restaurants and yet, still operating in a sole-trading company form where the liability lied personally over him as individual person. Together with nortb, we strategise a plan so that the owner would not have to pay such an increment of taxes due to his company form (and yet selling the 4 branches at the same time).
Our analysts traced a temporal plan that would combine the waiting times of different steps of bureaucracy with the data analysis and internal audits that nortb consultants had to conduct. The two major challenges were 1. Establish a final base price and compare it with the cash-flow and 2. Avoid the owner to pay taxes over profits due to its company form.
Breaking down the assets
To achieve a final price in a limited form company, a breakdown and separation of all the assets was required. Between stocks, immobile assets, capitalisation of clients streams, among others, the final price was a challenge hard to get due to the mixture of accounts with personal expenses.
Nortb consultants reached a final price and had to deal with a couple of challenges along the road. When converting the company form, nortb strategy managed to spare our client around 70 000€ which suffered a 21% corporative tax in the end. We suggested our client as well a continuation of his company, in a different branch (one more oriented into investments, in order to spare nortb client from overpaying taxes.
A transition along the road.
Sometimes selling a business is just a transition into a newer step. In Portugal, more than 30,000 small businesses are bought and sold annually. Over the next ten years, this figure is anticipated to increase dramatically as baby boomers get older and opt to sell their businesses.
A company's success is not solely based on how financially viable it is. The methods, which were successful for the prior owners, may not be effective to the new owners. To make the move from purchasing a firm simple, we will be offering advice and methods. Contact us today.
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