Carl Taylor Accountant and Business Consultant

 

 

Covid-19 has prompted a massive burst of innovation and diversification. We’ve had clients selling one thing one day, and overnight they've begun selling a whole host of Covid related products.

That’s brilliant, but what’s going to happen next? Like every product, these new products and new markets have a defined lifecycle... 


Source: Harvard Business Review

It varies, but normally this whole product life cycle can take anything from 2 years to 6 years or more. But what has historically happened in 2 years has happened in 2 months in some cases, 2 weeks in others. A market has literally gone through massive growth, then maturity and decline all within a very short space of time due to the shifting demands Covid has caused.

The point is you can do one of two things – you can either choose to let this new business fizzle out, or you can maximise the profit and value you extract from it. I’d choose the second option!

Here’s 3 keys steps you need to think through in view of maximising the success and value you get out of your recent diversifications:  

Check where you are in the product lifecycle with any new products / markets you’ve moved into
  • Review the product lifecycle – check where the market is? Are you still in growth? Have you reached maturity? Or are things starting to decline?
  • What are you going to do extend the lifecycle and stop the decline? This burst of innovation will likely have forced you to develop new supplier relationships, or build on existing ones, and most likely will have brought significant new customers on board. So you need to step back and review your suppliers and think about what other products do our suppliers produce or supply that will feed into these new customer relationships in the longer term?

Set direction, and get the housekeeping right
  • Get commercial advice – speak to an experienced consultant about your plans
  • Think about branding and marketing (i.e. setting up new websites, getting branding developed and registering domain names)
  • Think about IP protection – register any relevant trademarks, but think carefully about it. It can have serious tax implications if you get it wrong, and serious tax opportunities if you get it right
  • Split out your reporting – you need to start understanding sales and profitability of your core business and your new elements
Split entities
  • If relevant, split entities, so you have clear definition on profitability and commerciality of the two elements of your business. It’s really important that this is set up right, and that you get good advice on the best structure
  • This allows you to be very clear on the profitability of each side
  • Will you be able to focus on 2 businesses at once? Probably not...
  • It means ultimately you can sell off one side of the business when the time is right. There's even a possibility that your new business might actually overtake your original core business, and with the right structure in place you can sell either side easily, tax efficiently, and you can maximise the value of it because it’s in a separate entity.

There’s much more... We’re holding an online seminar on 5th August where we’ll be discussing this in more detail, and we’ll also be covering the key drivers of business value, with tangible actions to help you maximise the value of your business, along with key points to help you understand the tax and legal opportunities and pitfalls involved in restructuring, buying or selling a business, including:

  • How to structure your business for maximum success and value where you've diversified
  • The building blocks of business value
  • The legal aspects to consider
  • The tax opportunities
  • The importance of your people
  • The pitfalls to avoid when buying or selling a business
  • And much more...