Selling your business

When Should You Think About Selling Your Business?

It’s natural to become attached to a business, especially if you have built it from the ground up and even if it is not doing well. Experts advise, however, that business owners should have an exit strategy in place as early as possible.

Here are a few reasons that it might be time to start preparing to sell your business and what to consider:

 

Has the business environment shifted?

Selling your business makes a great exit strategy when looming changes are likely to affect the operations of the company negatively. For example, the IT industry is faced by rapid changes that outdate businesses within short periods.

Business owners should foresee such changes and plan an exit strategy that takes this into consideration.

Retailers and B2C companies are the most affected by the current technological trajectory – apps, online retailing and other trends threaten their existence. The introduction of Uber almost phased out the taxi business while in-person speed-dating services have become extinct with the invention of dating apps.

Sadly, even if your company wanted to adapt their operations to the current trend, you would have to make these changes rapidly in order to try and catch up with the competition. Therefore, a team dedicated to the marketing and PR can make or break your business and its potential future should they not be able to foresee such trends early enough.

 

Is there a good opportunity?

Exit strategies are not just caused by bad experiences but also good ones.

You might want to sell your company if a lucrative opportunity is presented. Buyouts add liquidity to a business especially if you are managing different branches.

Experts say that running an independent business is a risky venture and the longer you hold on to it, the higher the chance of failure. While the business has a substantial value, you can only realise it when you sell part of or the entire venture.

For example, a young social-media website may get an offer from Facebook, Twitter or another established company.

 

Are you sick or ready for retirement?

Running a company is difficult enough to do when you are operating at full capacity so, if you become ill, selling your business might be a way to relieve yourself of a lot of stress.

Similarly, if you no longer enjoy running your firm, selling it makes sense.

Approaching retirement, you should also consider selling your business and try to cash in on your many years of hard work!

 

Selling is a process

No matter what reason you have for selling, before you do you will need to make sure everything is in order. This process can take a while. A potential buyer will want to look back on at least three years of company books that are in order, and so it’s often advisable that you’ve been keeping books with a sale in mind in that time.

If the company has been incorporated, you should decide if it will be sold as a share sale or an asset sale. Businesses that have been performing poorly prefer making a share sale where the owner sells everything, including the incorporated company.

You also need to make yourself dispensable; nobody wants to buy a business whose value depletes when the owner leaves. Potential buyers want a business that runs well without specific input. You should ensure the company has a strong team, effective business procedures, efficient communication and successful marketing strategies that will accommodate the new owner.

Expert help also comes in handy when preparing to sell the company. A professional valuation expert can help you to determine the net worth of the business while a business broker finds potential buyers and navigates the sale process on your behalf. CMC Partners has the experience of both  these aspects plus more. Your local CMC Partner will give you a valuation, help you and your business increase the business worth with a planned exit strategy and prepare your business for sale when the time is right for you. Over the last 25 years CMC has been involved in many successful business sales, reaching a total value of over £156 million to date. Read more about CMC Partners here

No matter what the motivation for selling, if you have everything in order there is no reason why your sale can’t get you a price that you’re happy with so that you can move comfortably into the next phase of your life.

By Anthea Taylor, Assistant Editor at Dynamis and writes for all titles in the Dynamis stable including BusinessesForSale.com, FranchiseSales.com and PropertySales.com as well as other industry publications.

What Owner Managers can learn about Succession Planning from Queen Elizabeth II

This year sees the 93rd birthday of Queen Elizabeth II, who is the longest serving monarch in British history, but her succession planning has been in place for many years and although it is laid down with the ‘line of succession’ clearly laid out and known to all.  It is obvious that other members of the ‘family’ are becoming actively involved in the family business in preparation to take over.

As an owner manager of a business that is owned by you with other family members,   is your succession plan in place, accepted by your stakeholders – not just family members, other directors, employees, customers, etc.?   Research has shown that there is a lack of documentation around the future ownership of a family business with only 24% of business owners having a policy that the business will remain family owned, with 40% having no specific policy at all regarding the future ownership. What is more surprising is that 84% regard succession planning as important but there seems to be apathy towards doing anything to address this. Over 75% of family business owners have not documented management or ownership succession plans and only 44% have actually sought advice about their succession options.

Part of this apathy would appear to be family business owners think that there is no interest from the family to take on the business, or simply that there is no-one within the family suitable.

This may be very true. Many owner managers I work with have deliberately ensured that their children have not been brought into the business, and many children themselves want to develop their careers away from their parents’ business. As time goes by, it becomes less likely that a grown up child will want to return to the business, although they are very happy to share the financial rewards of their parents’ hard work.

Also, it is very frequently heard that the founder does not want to give up what they have created and developed. This frustrates the preparation for succession and can lead to the founder ignoring the need to choose and mentor a successor.

So if as an owner manager of a business, you want to start thinking about successful succession planning, ask yourself some serious questions (and answer honestly). These questions include:

  • Are the current owner managers finding a suitable successor from within their family? (Yes/No)
  • Have alternative exit strategies been discussed openly within the immediate family? (Yes/No)
  • Has everyone involved in the business fully understood the founder’s vision? (Yes/No)
  • Is the founders’ vision important to next generation successors? (Yes/No)
  • How does entrepreneurship succeed from one generation to the next?
  • Do the 2nd & 3rd generations have more entrepreneurial vision than the founding generation? (Yes/No)
  • How can we learn from the experiences of existing family businesses that have gone through the succession process?

For help in getting advice on successful succession planning between generations of the family – fill in the contact form below or call 01844 319286, and Phil can arrange a call with you. Specifically he will be able to discuss with your confidentially and unemotionally

  • Recommendations for succession and inter-generational estate planning
  • Understanding family business challenges and conflict
  • Understanding the dynamics of an entrepreneurial family business

5 reasons why a business owner needs an exit strategy

Building a business is undoubtedly a tough job. Of course, most of the owner’s energies go into the day to day issues, winning customers, driving/directing the team and generally firefighting! So, thinking about an exit strategy is never on the owner’s top list of immediate priorities. However, there are many good reasons why the owner needs to give some thought to this area; it is a hugely important area of wealth generation that can represent an expensive mistake if not treated successfully.  Exit strategies aren’t just about the immediate job of selling a business – they are relevant throughout the life of the business.

1. An exit strategy gives you a plan.

Thinking long term about a business isn’t just for major corporations. Where do you want your business to be in 5 or 10 years? Will the business deliver the cash to fund the owner’s life style? Producing a plan to deliver the business you want is a hugely valuable exercise.

2. What type of exit is right for you?

A business exit can take many forms. A sale is certainly one option, but maybe a family succession is the right way, or even a management buyout could work for the right team. All of these options need long term planning. The common factor to all of these is how the business would work without the current owner at the helm.

3. How will the business function without the owner?

It is often tough for an owner to envisage how the business would work without them. However, whichever exit route is chosen then the role of the owner will be a key consideration. The owner needs to think through how the business will operate without them. This has a major impact on company’s sale value as no buyer wants to buy a company where all of the key knowledge is locked-in with the owner.

4. An exit strategy forces the owner to take the wider view

We all occasionally suffer from being “too close” to an issue and sometimes this means that we don’t take the best long-term decisions. Standing back from the business means that the owner takes a more dispassionate view of the business. Seeing the business from the perspective of a new owner will help the owner to address and fix some of the more strategic issues.

5. Planning to maximise retirement income.

A lot of business owners have only a vague idea of how the sale of their business will fund their retirement. This is one of the major decisions of anyone’s working life, so it needs to be right. There are some simple calculations that relate the business’s future profitability, to it’s possible sale value, and the amount of pension income that will be generated. CMC can help you with this calculation and help focus the owners mind on how successfully building the business can deliver the right level of cash for the owner’s eventual retirement.

Conclusion

Setting a long term plan and formulating an exit strategy will deliver benefits for any business. CMC have over 25 years of working with business owners to produce an exit plan and go on to a successful exit – call us now for a free initial consultation. Meanwhile, you may be interested in requested this FREE checklist on How to improve your chances of a successful exit

Making your will

Have you made your personal will? Probably; after all, it’s the right thing to do, isn’t it?

So why do so few business owners do the same thing for their Company?

You want your children to inherit your wealth without undue hassle. But how much thought have you given to who inherits your business; and who will secure its future success?

When I mention Succession Plans to people, it’s not hard to see folks switching off. There are more important short-term issues to deal with. ‘It can wait – I am fit and healthy right now’.

A scary true story…

So let’s approach this from a different angle – a real-life present-time story.

The owner of a very successful business consultancy sat down in her armchair last August Bank Holiday Sunday, and had a dose. Tragically, she suffered a brain haemorrhage and never woke up. Totally unexpected. She owned all the shares and was the principal contact for the firm’s blue-chip Companies.

Her personal will was clear enough. Her husband inherited all the shares. But he had no interest in the business. The present employees were unprepared for this tragedy, and there was no natural successor with the same level of experience to take it on. So what will happen?

What will the new owner do with a business in which he has little interest or knowledge?

Will current staff remain with all this uncertainty?

How will presently loyal customers react as time moves on?

How will the business set about winning new work in new markets without their principal business-winner?

Right now, no one has the answers, and time is ticking on.

How to avoid this predicament?

Start by having a clear business plan for the next three years.

Include in it the management structure that will deliver the results.

Assess your current team; can/do they fulfill the roles designated in that structure?

Identify any skill gaps and decide whether or not they can be filled from within.

If not, carry out a thorough and disciplined recruitment plan.

And that is the basis for a long-term Succession Plan. Simple, but…

This all takes time

It can take anything from three to five years to put in place the right ‘future-proof’ structure and get the key players performing at the right levels.

And here’s the trick: this same process is essential for selling your business when you retire for best value. So it’s not just a question of securing the business against the unexpected arrival of the Grim Reaper. It’s about ensuring that your legacy will continue once you have retired, allowing you to have a long and happy retirement, leaving behind a happy and motivated team to take things forward.

And that has to be good news for everyone, doesn’t it?

Case Study – 1973 Ltd – Progressing from ‘Doing’ to ‘Managing’ a Business

Growing a creative Digital Marketing Agency

CMC helped the directors of this digital marketing agency increase revenue by 387% in just five years.  Through business planning and process reviews they continue to grow the company to maximise business value.


 The Challenge:

  • Grow the business and increase asset value
  • Create time and space for the directors’ to manage the business
  • Build confidence in directors’ abilities to win bigger contracts
  • Increase existing customers’ spend in line with top client
  • Expand the company’s target market and product offerings
  • To be recognised as a quality email marketing solutions provider

The Benefits:

  • 387% revenue increase within 5 years
  • Won a three-year contract with their main customer, covering the US and EMEA, providing stability whilst focusing on new customers.
  • Expanded into the B2B customer base and leveraged into the B2C market
  • Changed the directors’ reactive approach from being a 100% ‘doing’ to 50% of their time focusing on managing the business and sales and account development
  • The team has grown four fold with a recruitment plan in place for the future

‘CMC’s advice, support and wealth of experience has helped us understand how to successfully build and grow our business. Together we have developed a clearly defined plan with realistic goals to help maximise our business value.’ Chris Barnett, Director, 1973 Limited

Discover how 1973 Ltd achieved business growth which significantly increased their turnover….

business sale - Brian Baker

Case Study – Successful Business Sale and Secure Retirement

Successful Business Sale to Provide Secure Retirement for the Directors – Graefe Ltd

CMC provided expertise, experience and guidance to the capable directors in successfully selling their business for a price beyond expectations. Find out how CMC Partners helped with this business sale by downloading the full story below.


The Challenge:

  • To sell the business
  • Achieve sufficient capital gain, allowing comfortable retirement for the directors
  • Complete the sale within 2-3 years time frame
  • Little disruption to the operation of the business

The Benefits:

  • Increased business value, allowing directors to retire comfortably
  • Exit/sales process completed within 2 and half years
  • Quick and efficient transfer of business ownership

When selling a business, finding someone with the knowledge is important but finding someone you can trust is paramount. We trusted CMC and we knew they were on our side. It was not a process they applied to us, but a journey that we took together. Brian Baker – Former Managing Director of Graefe Ltd

 

Why You Should Consider Your Exit Strategy – NOW

Over the next 10 years, the landscape of business ownership in this country (and across the globe) will begin to change dramatically. The unstoppable change has already begun as millions of baby boomer business owners begin to contend with retirement and the importance of exit planning.

By definition ‘baby boomers’ are people born during the demographic post–World War 2 baby boom approximately between the years 1946 and 1964. This includes people who are between 52 and 74 years old in 2018.

As recently as 2016, roughly 2/3 of all businesses were owned by baby boomers. Unfortunately, many baby boomer business owners don’t begin to think through their exit strategy until they are on the brink of retirement age, which puts them at a significant disadvantage.

One factor that complicates the exit strategies of baby boomer business owners is the question of who will take on leadership of their company once they retire. In past generations, business owners would usually pass their business on to their children, but because baby boomers had fewer children than their parents, many baby boomer business owners are forced to face challenges regarding succession and liquidity.

If you’re a baby boomer business owner who has not yet begun the exit planning process and wonders when is the right time to get started, the answer is now. Depending on how close you are to retirement, here are some questions you need to answer and some ideas to help you begin your exit planning.

Remember one way or another you will exit your business!

You need to plan now. Exit planning requires careful consideration of important questions. These are the types of questions you should begin to think through:

  •     What happens if you are not able to run the business?
  •     Who will run the company?
  •     How will you be able to provide for your family’s financial needs?
  •     How will you prepare your successor to run the company once you are gone?

If you plan on leaving your business to your children, then you must determine what you will need in retirement. Think about how to structure the transaction to balance the needs of your children with your needs. Begin to plan the transition of management.

The process of determining your exit strategy is not just limited to the baby boomer generation as the fact that some day you will no longer be able to work within your business will come to us all. If you need to discuss your options, or even just your starting point,

For help in getting advice on accessing finance, business planning, or simply day to day support in making serious business decisions – fill in the contact form below or call 01844 319286.

Brexit Planning

It’s good to talk – A simple guide to communication for small businesses

Talking about communication, or lack of it, I was once the Non Executive Director of a small company and observed a silent row developing between MD and Technical Director – by email…

Because the two men were only a few feet and one partition away from each other, and I was fifteen miles away, I called the MD – suggesting that they go out for a snack and a pint. Of course this defused the situation.

So let’s reflect on areas where it might be good to set aside smart communication methods in favour of face-to-face meetings or phone calls:

1. Staff communication

How often do you tell your staff what is going on and listen to their concerns and ideas? Or walk the office or shop floor?

‘I haven’t got time for that; I can just email them’. This devalues any sense of respect you may have for your team.

The former Chairman of one of the largest supermarket groups allocated one day every week to visit stores, talk to staff and customers, finding out what was going on. During his tenure, the business was hugely successful. No coincidence – he was a strong team player.

2. Communication with customers

How often do you talk to them directly and find out how satisfied they are with your service and product? Customers really value this sort of contact. It is what differentiates successful, proactive business managers from the crowd, who often simply claim that they haven’t got the time to call people.

I once called the main competitors of a particular client. It was amazing what I found out in a few short conversations – about the market, how the competition viewed my client, and about customer opinions also. How many businesses do this sort of check?

3. Talking to your service providers

How often do you talk to your bank for example? And do you encourage them to contact you? All too often, business owners/managers feel that it’s best not to say anything if the going gets tough. The reverse is true: bankers are usually delighted to learn that you are responding to the situation. They do not like surprises. Who does?

Recently, a client of mine was called to a meeting with his bank and was in a state of panic because he was suffering in tough trading. We planned the meeting, and the net result was that the bank extended his overdraft and provided emergency loan facilities. My client’s previous excellent track record made the bank more confident that he would pull through OK.

4. Talking to your suppliers

Some business leaders feel that they know their suppliers well enough and will happily seek to dictate terms to them, heedless of any warning signals.

Most importantly we should consider price negotiations: we know how heavy retailer pressure causes subtle reductions in quality as suppliers cut costs to preserve margin. The irony is that those same retailers introduce ‘premium’ products to fill the quality gap. The introduction of organic dairy products is a classic example. Besides that, consider the well-recognised inferior quality of meat and green-grocery products (compared to what you might find in, say, farmers’ markets at comparable prices).

It all comes down to good communication with business negotiators listening to what their suppliers say. We would all be more satisfied with supermarket product ranges if this happened more frequently.

Fundamentally, the responsibility for changing the communication culture rests at ‘The Top’. Why not start by encouraging phone calls as the first line of communication? The Company which communicates confidently and effectively will always be one step ahead of the competition.