Day 22

Build and protect your IP!

Intellectual property, or IP, can be very valuable to a buyer and it also protects your business by creating barriers to entry for would-be rivals. After all, if you own the patent for something, the only way a rival can compete is to buy you and ‘take you out’.

Register trademarks for business and product names. Patents should be registered where possible to protect your ideas – and there’s a good tax reason for doing this as you could pay just 10% tax on profits derived from patented products under the Patent Box rules!

The knowledge that your staff walks around within their heads is another important piece of IP that many business owners overlook and, if they leave, they take that with them! In a way, the systems manual I mentioned earlier goes some way to solving this problem; it stops knowledge ‘leaking out’ of the business when staff leave, as all the important ‘how do we do this?’ issues are written down in black and white. Personal knowledge needs to be turned into corporate knowledge so that it’s permanent, not transient.

But you can’t get away from the fact that individuals do take knowledge with them when they leave. To protect your business, there should be clauses in employment contracts to make sure that staff exiting the business can’t set up in competition with you, for example, by using the knowledge they have; buyers will check for this sort of thing as part of the due diligence they’ll carry out during their pre-buying process.