How to help your start-up survive divorce

Vardags’ finance director and in house financial expert shared his tips for start-up entrepreneurs facing divorce with Elite Business. Speaking from his experience working with top businessmen and women at Vardags, Stephen said “The classic entrepreneur works extraordinarily hard and often does that in quite anti-social ways, whether that’s late at night, over weekends or travelling to get a deal done. It’s a high hours, high stress culture and relatively few manage to balance that against the demands of family life.”

He went on to warn that divorce “can be particularly problematic for entrepreneurs because a high proportion of the wealth of the marriage will be tied up in the business and that is often an illiquid asset. In extremis, the business could end up having to be sold in order to fund a divorce settlement.”

One of Stephen’s main tips was for divorcing entrepreneurs to abandon rose-tinted glasses when assessing the value of their business, rather than always talking things up. Speaking from experience Vardags’ cases, he said “One has to give the entrepreneur a dose of realism when it comes to a divorce. Just because you’ve attracted investment that notionally values a business at one value doesn’t necessarily mean that’s the value that you could really get for your shares were you to sell them.”

Stephen went on to explain that issues such as liquidity and the role of the entrepreneur could help reduce the value that a court applies to a business. He explained also the importance of taking good advice, saying “If you head off in the wrong direction and you’ve got somebody on the other side who is absolutely determined to hunt you down, it can be incredibly time-consuming, incredibly expensive and ultimately you can get caught out. One should be quite proactive about financial disclosure: be upfront about it, present your finance in a realistic – as opposed to optimistic – way and let that be challenged by the other side.”

Finally, Stephen spoke of the potential advantages which could come from reaching an early and fair settlement, “I’ve seen a number of incredibly successful entrepreneurs take the attitude of ‘I’m just going to give them half of it. I then want to move on with my life and just go and earn it again’,” he recalled. “It’s another alternative: rather than fight it, just go with it and then make yourself successful again. It saves the time and aggro of going through a costly and acrimonious divorce, something which can be incredibly distracting when you’re trying to make money.”