How long do I want to stay in my business?
The decision to sell your business represents the best way of realising value for you and your family.
If you’ve had a wake-up call, here are two further questions to consider:
- How am I going to realise the wealth in my business; and
- When am I going to do it?
When will this be?
So, do you see yourself running your your business in
- One year?
- Three years?
- or in five year’s time?
There is a key assumption behind these questions. It is a fact of life (and death), or a wake-up call, that eventually all of us in business will have to exit (in some form or other) our business.
If the plan is in one year, then we need to start marketing immediately “warts and all”
In three year’ time, then we have the opportunity to put in place an exit plan and so be in a position to choose whether or not you want to sell.
A five year plan will give you the chance to create a great business…
I come across many business owners who have has a wake-up call and decided they want to sell. Most of these people will say to me as soon as possible. So, that is in a year’s time. We then set about marketing the business “warts and all”. We are not always successful at first attempt.
Fewer owners say to me my plan is to sell in three year’s time. So how can I work with you to maximise the value and make the process as smooth as possible. This usually gives a better outcome as the sale, in whatever format, is planned.
So, what do I mean by “exit my business?”
It is, perhaps, a blunt question. It does cover several options . You can read about these on another page of this website. There are essentially three routes to go down: passing onto family members, selling for a capital sum (trade sale, management buyout or an Employee Ownership Trust) or winding up the business.
To achieve the best value a trade sale is likely to be the chosen option.
Is now a good time to sell?
There is a detailed answer to this question on this page of the website. The page was written in August 2019, before the results of the general election. The article pointed out three important facts that are still relevant today (December 2019).
- Sterling is undervalued;
- Interest rates are low (0.75%) as at 23rd December 2019; and
- Brexit is now happening.
I would now add to these the hope we are now entering a period of relative political stability. The scale of the victory – an 80-seat majority- was unexpected. It does mean the government can “get on with delivering Brexit”
The lengthy uncertainty rather than the threat of Brexit itself was what has been holding people back. The construction industry started the rally followed by retail and restaurants.
Furthermore, in the Queen’s Speech delivered on 19th December, it was noted that “My Government will invest in the country’s public services and infrastructure”. and “My Government will prioritise investment in infrastructure and world-leading science research and skills, in order to unleash productivity and improve daily life for communities across the country.”
“To support business, my government will increase tax credits for research and development, establish a National Skills Fund, and bring forward changes to business rates. New laws will accelerate the delivery of gigabit capable broadband.”
There are two other factors working the vendor’s interest.
One relates to the fact that there is slow economic growth. In its latest Economic Outlook Report November 2019, the Bank of England says UK GDP growth picks up from 1.0% in 2019 Q4 to 1.6% in 2020 Q4, 1.8% in 2021 Q4 and 2.1% in 2022 Q4. Even so these are anemic rates of growth.
Consequently, this situation means that demand for goods and services will be weak and acquisitive businesses will be looking to acquire businesses to meet their growth forecasts. If your business is a likely target, then you really do need to consider an exit plan. To do this read this page on this website.
Secondly, there are considerable funds lodged with Private Equity institutions waiting for suitable opportunities.
Now is a good time to sell a business.
So, whilst day to day you may be continually running on that hamster wheel with your head down. At some point, you need to look up. Consider assessing why you are doing this. What are you building for? Are you directing your efforts at the most important and potentially valuable aim – your exit?
Do you have the skills, drive or, indeed, appetite for the risks ahead? Can you position your business to be attractive to a buyer. If so, then now is the time to start the process of positioning.
Likewise, nobody would choose to leave their loved ones with more hassle to sort, when they are dealing with bereavement. Establishing a structured exit plan, well before you ever need one, should be on the New Year’s Resolutions list for all business owners.
So, if this note has awakened you then here are some of my tips for the New Year:
Start by knowing your own financial position since this will largely determine the timing of and type of sale you will achieve.
Prepare the business for sale so as to maximise its value and make the process as smooth as possible.
Selling your business represents the best way of realising value for you and your family.
As you can see from reading this paper and the links herein, leaving the decision to sell your business too late could be really costly.There are no guarantees you will receive an offer let alone an acceptable one.
Bear in mind this process can takes months. Moreover it is not something that can be rushed into. In order to maximise value and the chances of selling, there should be a business that is sustainable without you, the owner. In other words it has to be sellable in the first place. Consequently, it will mean the systems and processes are in place and you, the owner, are not working in the business.
If this paper is of interest to you then I would be very happy to chat through the points with you and to see if creating a plan that works for you and your company.
I look forward to hearing from you.
If you would like to read more of the Overview of Selling a Business, please return to this page on the website.
Please do not leave it too late.
The information contained in this briefing is based on information available as at the date posted and may be subject to amendment. It is written as a general guide and is not a substitute for professional advice. You are strongly recommended to obtain specific professional advice from us before you take any action. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this briefing can be accepted by Assynt Corporate Finance Limited or its employees.
Andrew is the director of Assynt Corporate Finance Limited and an Accredited Member of the Association of Crowdfunding experts.
Previously a partner and head of corporate finance at Baker Watkin LLP, Andrew has more than 40 years of experience in all forms of corporate finance across many business sectors.
Andrew was the Chair of Governors at a local school for six years retiring in December 2020 and continues to be an Assessor of Expeditions for The Duke of Edinburgh's Award.
You can find out more and connect with Andrew over on LinkedIn.