Sell your business?
Should you sell your business? Can you sell your business? Two questions that many people will be asking themselves as we move into a phased exit from lockdown.
Opening the doors of business in safe mode might seem the most pressing task right now but how we trade in the emerging ‘new normal’ environment is the real concern. Selling up and avoiding the challenge altogether will, therefore, be a tempting option.
Not all businesses are going to pull through and not all owners will be prepared to take on the journey ahead. But one thing is certain: businesses will survive and thrive, helped in no small way by the sale and acquisition of going concerns.
I’m an experienced advisor and facilitator of the sale and acquisition of small to medium sized businesses. In this blog, I look at selling – the options open to you and the challenges you face.
Where is your business in its lifecycle?
You’ve got a business that’s reached a certain stage of its lifecycle then, wham! Covid-19 hits forcing you to take stock and review your expectations. In my view, there are 2 distinct categories of ‘saleable’ business right now:
- The Growing Business: cashflow is OK to reasonable and there are definitely customers on the other side of Covid-19. But changes are necessary. Whether you sell your business will depend upon your personal and professional plans. Do you have other priorities in your life? Are you ready to welcome another partner or partners to share the future of your business? Do you want to consolidate and plan for an exit in, say, 2 years time?
- The Surviving Business: the business is viable but has reached the stage when investment and some honest assessment is called for. If you’re in your late 50s, early 60s, it could be that retirement or a complete change is on the horizon. Seeking a buyer with the money and energy to modernise your business could be the best option.
I deal with many different types of business, each having reached their own individual ‘state of play’. Let me give you a brief, but pragmatic, view on the ??? of the two categories mentioned above.
The Growing Business
From communicating through social distancing protocols to understanding how to make your business the number one choice for customers, the post Covid-19 era is going to be a mix of human and technological intervention. The business that can demonstrate its robustness and an ability to adapt is going to be very attractive to a buyer or investor.
Here are 3 simple considerations to help you decide when or whether to sell your business:
- What does your business do and does it do it well? Does it offer goods or services that are likely to stay in demand and lead to a predictable income? Does it do this using an effective operating model?
- How much money is the business borrowing? This is not the time to be stacking up debt.
- Who is your target customer? If you are selling must-have consumer goods and services, or focusing on high net-worth individuals, then your business will represent more potential than one providing discretionary or capital goods.
Be objective – how attractive a proposition is your business? (Would you buy it?)
The (Just) Surviving Business
Escaping the longer term financial commitments of leases and borrowings may be your dream but the buyer of a surviving business is going to need definite some signs of life. Also, do you have enough money to retire now and move onto the next stage of your life, irrespective of what your business is worth? If yes, then here are 2 key considerations:
- A prospective buyer is going to be interested in your customers, turnover and key employees. They’ll be looking at the tangibles and economies of scale to decide how well your business could sit with theirs in the future.
- Interested buyers need detail about the market place so being able to demonstrate competitive advantage is key.
If there’s a good foundation and a degree of synergy, there’s an opportunity to sell your business.
Finding a buyer for your business could be your smartest move
Whether your business is at the growth or surviving end of the scale, selling it is a worthy consideration. Timing isn’t ideal given Covid-19 and the increase in taxation on the sale of business since the last budget. Nevertheless, trade buyers will be looking for opportunities to create scale through ‘buy and build’ strategies.
In assessing the options facing my clients, I look at ethical considerations as well as financial and operational. What kind of moral obligation to your employees (and other stakeholders) should you be taking into account? Mind-set is also a key factor. In his recent webinar, John Nieuwenburg* of w5coaching, spoke about business people having two mind-sets: fixed and growth.
Those with a fixed mind-set avoid challenges, give up easily, see effort as fruitless, avoid feedback and are threatened by the success of others. Whereas those with a growth mind-set embrace challenges; persist in the face of obstacles, encourage feedback and see effort as the pathway to ever higher levels of achievement.
Mind-set, your personal plans, the state of your business and ethical considerations – these are the headline topics to help you decide whether – and how – to sell your business. For sure you may have to compromise on the sale price but, if the time is right for you and the business, finding a buyer for your business could be a very smart move in the long run.