Selling your business

White Paper: So you are thinking about selling your business?

The decision to thinking about selling your business is one of the most important and emotional business decision you will ever make. It’s life changing with no room for error.

Thinking about your exit strategy early will give you the time to maximise the return on your investment for when you choose to sell your business. If you wait until events overtake you, the outcome may be disappointing.

This white paper will provide you with the knowledge on exit strategies and the process of selling your business, if that’s the option you wish to take.

What this ‘thinking of selling your business’ white paper covers:

  • The importance of planning your exit strategy
  • How to calculate your business worth
  • The 6 step selling process – how long it will take to sell
  • Basic business health checklist
  • Factors that can improve your business valuation
  • Tax planning
  • After the sale

We couldn’t have gone through our business sale without CMC. We knew what we wanted to do but we just didn’t know how to get there. CMC knew the selling process and was able to advise us each step of the way. Brian Baker – Previous Managing Director of Graefe Limited.  Read how we sold Brian Baker’s business for £3.2m here 

Download your copy by simply completing the form below

We shall then email a copy directly to you.

6 Signs You are Not in Control of your Sales Pipeline

The sales pipeline is a visual image to show you how much business you will attempt to close in a given week, month or year, i.e. it provides an overview of current sales opportunities.  Sales pipeline management allows you to track open sales opportunities as they move through your sales process, and with proper management, you can analyse problem areas in each stage of the pipeline.  Control your pipeline well and you will feel more in control of your sales figures. There are several warning signs you might be not in a control of your sales pipeline.

You spend too much time on administration.

This is the simplest and most obvious one – if you spend hours every week on administration and reporting, you are missing out on productivity and losing the chance to move your sales forward.  Also if sales people are spending too much time on administration, then you are using the wrong tools.  If you manage your sales pipeline well and have the right tools for it, then you no longer need to spend so much time on admin and can instead focus on what you do best – selling.

Opportunities do not move fast enough from one stage to another.

You have lots of opportunities in the sales pipeline, but feel that you are not able to manage your prospects and sales activities to effectively complete the sales process.  Each lead, or opportunity, must be managed, organised and developed.  You do that by following-up with your customers.

You do not know how many opportunities you have in the pipeline at each stage.

You don’t have an overview of all your open opportunities and therefore you are not able to recognise your priorities.  Your first and most important priority is to focus on the prospects that are “ready to buy”, i.e. the people who have agreed to the terms and conditions of the sale and have an approved budget for it.  Next, you need to look at your sales process and focus on the almost ready to buy prospects and do what you can do gently move them further along the funnel. And so on, following up on all of your current prospects, you can then tackle all the administrative work.

You do not know who the decision makers are.

Selling to one person is tough and in most companies there will be several different decision makers and advisers involved.  The more expensive or complex your product or service is then naturally the more complex the buying team gets.  If you are having a hard time identifying who is in charge of making a decision to buy, you will end up wasting your time and presenting the wrong benefits to the wrong decision makers.

You continue to lose valuable sales data.

One of your sales people leaves and then all the information leaves with that person.  You are stuck in the pile of emails trying to pull together all the information on the customer that was being sold to.  You then have to try and build a new relationship with the customers.  Trust is earned won over time and as long as you don’t have the way to deal with people who leave, you are at risk to neglect a valuable amount of your sales opportunities.

Your sales cycles are too long.

If your sales cycles are too long, the problem is likely to be that you have a gap somewhere in your sales pipeline.  When it comes to preventing these gaps, do you know if you need a larger volume of leads or do you need fewer, but more qualified leads?

In order to make the right decision, you need to be in full control of your sales process, know your customer history and how long it takes you to move the lead from prospect to customer. If you don’t have this kind of visibility to your sales pipeline, then you are failing to shorten your sales cycles.

Conclusion

The best way to keep track of and control what’s going on in your pipeline is through CRM software that can be used to manage the sales pipeline.  CRM applications provide clear visibility of sales cycles by tracking prospects through each of the sales pipeline stages of your selling process. Having the full visibility of your pipeline and a clear and managed process will bring to the light what works and what’s not on the way to winning deals. To identify where your funnel is leaking does not mean that all the prospects in your pipeline are going to convert, but you will be able to prevent some of the loss.

If you as an owner manger wanting to consider the best way to plan, install migrate to and develop the processes around a sales pipeline focussed CRM, call Phil on 07720 397040 or email him or alternatively contact him via this form below.

Don’t try to sell your business on your own! Get the right team

Time and again, business owners will say that they don’t want to spend more than they have to when selling their business. Business advisers are seen as a costly, necessary evil, and they will do anything to cut those costs with a ‘spot of DIY’. They should ask themselves:

How often do you sell your business?

My reply is: ‘Once, if you’re lucky – so how come you think you know all the ins and outs?’

A strong team of three professional advisers will smooth the way to a successful sale at best value. They usually add value and more than pay for themselves – provided you have selected the right team.

So, which professional business advisers are essential?

LEGAL

It is important to review current arrangements ensuring that the legal team has spot-on experience in commercial law relating to business sales, and who will respond promptly and correctly to buyer enquiries.

In one recent case, a new legal team did a preliminary due diligence assessment and discovered that the owners had not obtained change of use authorisation to allow manufacturing to take place there.

They also discovered that the deeds recording the sale of original shares to the current owners had been LOST (by another law firm!).

Both issues were resolved before the sale process started – how much value would have been lost if they had not?

ACCOUNTANCY

Everyone appreciates the need for regular financial reports, but some business owners have higher standards than others. The reports are not always as frequent as they should be, and may contain inaccuracies.

Also there may be certain costs that would not be incurred under new ownership. These need to be isolated and reversed out in arriving at a realistic valuation of the business.

The financial records need to be meticulous so that a buyer’s due diligence searches will have most questions answered on the first trawl.

Again, it is essential that you have a ‘business-savvy’ accounting firm advising you, so that you are best-placed to anticipate and respond promptly to buyer queries or objections.

 

General management, governance, preparing to sell

Legal and accountancy professionals claim to offer consultancy services but usually focus on their own specialism.

The Directors and Managers need to be prepared in-depth over a longer timescale. The independent business adviser such as CMC Partners will guide the vendor through every step of an unfamiliar, alien process.

The main examples demonstrating the need are as follows:

SUCCESSION PLANNING

A prospective buyer wants reassurance that there is management continuity post-exit. He/she will expect key managers and staff to be fully briefed and supportive.

You must ensure that the buyer receives a warm welcome from the ‘Remain’ team, and this needs to be well prepared in terms of ensuring that the right team is in place.

NEGOTIATING PROCESS

Vendors must be alert to what the buyer is looking for in negotiations. No matter how good you are in selling merchandise or services, selling your own business is very different and you must be fully ‘groomed’ for the challenges to achieve best valuation.

OTHER ADVICE

Occasionally, it may be necessary to call in ad hoc specialists; for example, on property, especially if the business owns the premises freehold. Is it more valuable to include the freehold in the sale, or not?

Selling a business is all about confidence

which derives from the vendor knowing what to do and recognising the need for specialist advice from those with experience in corporate transactions. The cost of such services must be carefully negotiated but ultimately the cost should better be regarded as an investment:

To Secure best value when selling your business

The process is inherently simple, provided that the business has been set up in the right way.

CMC Partners over the last 27 years  have been involved in many business sales, reaching a total value of over £156 Million to date. We have the experience and the skills to help you.

If you are thinking about selling your business and need the right team, contact us by calling 01844 319286 or complete the form below.

The 5 questions to ask if you’re selling your business

At CMC we have over 27 years of experience of helping business owners both build and then sell their businesses. So we understand what owners have to do to maximise their businesses value. I think there are some basic questions that every business owner should ask if you are selling your business.

5 key questions to ask when selling your business:

  1. Are you maximising profits? There’s no escaping the basic issue that businesses are sold for a multiple of profits. Therefore systematically examining all area of the business in order to maximise the profitability is a really important area.  Remember the UK cycling team’s success at the London Olympics and the now famous quote;  Getting the maximum profit from a business is much the same idea! See another CMC blog that gives some examples in this area – How to improve your businesses worth.
  2. Is your business well run? Do you have processes that a buyer can see that demonstrates that the business is well run and under control. As businesses grow they often outgrow the management process – areas that often need attention are management accounts, sales pipeline management, people processes, IT systems etc. What about the “company housekeeping”, are you up to date with your tax affairs, customer contracts and other bureaucracy?
  3. What is the role of the owner? If all of the business value is in the “owners head” then this isn’t much good when the business is sold. Of course the owner must direct and drive the business – but that doesn’t mean they have to do (or try to do) everything! Owners need to think about stepping back a little and let their key employees take responsibility in a controlled way – make sure your management processes (see point 2 above) are strong enough to allow this to happen. An area I spend a lot of time on  with my clients is working out the best way to delegate some of the business management to their “second-in- command”. It is important to make sure that there’s enough controls in place to ensure the owner keeps in touch with all of the big issues.
  4. Do you have good quality sales revenue? To a large part, buyers are investing in your customer revenues. There are two particular things they value. Firstly a good spread of customers; focus on a single big customer is unlikely to help your value. Secondly, do you have recurring revenues such as maintenance or service contracts? Buyers will value strong ongoing customer relationships.
  5. Do you have an exit strategy? Preparing your business for sale is perhaps the most important thing you should consider when you are thinking of selling. Give yourself at least 2 to 3 years to get the business into the best possible shape. This will give you time to fix the things that need to be fixed and focuses the owner’s mind on the business itself, rather than the day to day hurly burly. It’s a well-worn cliché, but very true none the less that…. you need to spend time “on the business”, not just “in the business”. A previous blog of mine talks about why having an exit strategy is a very good idea, see Why have an exit strategy.

I’ve written a “white paper” that describes in more detail the issues to think about when selling your business – So you are thinking about selling your business.

It is a good idea to get help with the above, as an experienced and external perspective is absolutely essential. At CMC we’d be delighted to help – call me, Simon Scott on 07850 894998.

Valuing your Business -what are the basics

Valuing your business can be done at a very simple level following the principles below. Ultimately the price will be what a buyer wants to pay, but this often follows a set formula:-

Business value = profit times a multiple

That’s the easy bit, the question is how these two components are calculated.

Profit in this case is “normalised EBTDA” – this means the profit of the business, excluding deductions for tax, depreciation or interest.  The “normalised” term means adjusting the profit so that the cost of employing the directors is done fairly – for example, if you only take £8k as salary and £50k in dividends, your EBITDA will only have a deduction of £8k for a director’s salary. More reasonably a director could expect say £70k as a salary – so the EBITDA from the accounts will have to be reduced by the difference, in this case £68k. There are other potential normalisation adjustments that may be needed but the adjustment for the Director’s salary is by far the most common.

Calculating the multiple is highly subjective as it aims to reflect the attractiveness of the business.

The range of multiples can typically go from 3 to 10, but in practice mostly they are between 4 and 6. This assumes a turnover of over circa £1m per annum, below this prices are very subjective depending on the ability of the business to survive without the owner/manager.

Factors that improve the multiple

  • Growing revenue (both past and future potential)
  • Good recurring or contracted revenues
  • Unique or progressive products or services with high barriers to entry
  • Strong management team
  • Strong existing acquisition activity in the specific sector

Factors that reduce the multiple

  • Heavy dependence on the selling director(s)
  • High dependence on a small number of customers
  • Declining marketplace
  • Poor processes and financial information

If the business has excess cash in the business this potentially could be added to the value calculated above. This can also be very tax effective.

What Next?

If you would like a review of your business to asses its potential value, call Simon 01707 527870 or complete the form below.

Do Less Achieve More

“The difference between successful people and very successful people is that very successful people say ‘no’ to almost everything”  Warren Buffett

I was having one of those ‘informal’ coaching sessions, read ‘down the pub’, with a neighbour who runs his own business. He was complaining of being no further on with his business than when he set up 12 years ago. Not a unique conversation, many of my clients start out with the same symptoms.

An easy to adopt solution to this is to create a “Stop doing list”. Most business owners think about creating a “to-do” list, with its endless repetitions of things they could be doing more of for the company to be bigger, better or more profitable.

There’s just as much value in asking yourself, “What needs to go on my ‘stop doing’ list?” When you create such a list, you detach yourself from the tasks that take up time without improving your bottom line.

Over a couple of beers, we came up with the top four habits that need to go on your “stop doing list” if you want to achieve more success:

  1. Working for free.

It all adds up — those little favours, those “quick” phone calls with a potential client who wants to “pick your brain” without hiring you. Pick and choose when you give of your time, without forgetting that for every item you complete when you say yes to someone else, you’re saying “no” to yourself and your business.

  1. Comparing.

The energy that’s taken up by looking at what other businesses are doing and worrying about why your business isn’t further along could be better spent innovating and exploring the issues not being addressed in your industry and how you could provide solutions for them.

  1. Letting the admin slide.

Are you forgetting to invoice clients, letting clients to pay late, restocking supplies at the last minute or not answering emails? When these administrative tasks pile up, you’re less likely to want to do them.

Decide on systems or people that can handle these tasks, outsource them entirely or determine that you’re going to find a way to run your business that doesn’t require them.

  1. Rushing.

When you book meetings or projects back to back or overload your day with things to do, you end up multitasking, becoming sloppy and not putting enough time into self-care. It’s impossible to effectively run a business when you’re rushing. What’s most embarrassing is when the harried nature of your business starts to become noticeable to clients and colleagues. Take a look at my blog on prioritisation, to help!

When a company owner decides what he or she is going to stop doing, the results quickly become apparent. There’s more time and energy for the things that grow the business. Time to inspire workers and leaders and less time spent on those things that are unproductive. Start with just one thing that you’re going to stop doing and work your way from there to achieve more, by doing less!

7 Areas that Will Increase Your Business Value via a Planned Exit Strategy

At CMC Partners we are very lucky to work with talented owner managers who have grown their business, and 1 topic that comes up early on in the series of meetings is about how can they develop an exit strategy for the business or plan for a succession with getting the true value.   They do not have to work 7 days a week until they die, and get some of the value they have built up in their business into their own bank account.

It is a fairly complex situation as every business and owner is unique in what it does and what the business owner personal objectives are.  I have written about the different subjects including how to value your business to types of sales such as MBO, MBI, trade sale, etc. (read through the articles here).

The discussions with business owners fall into 7 key areas:

1.Increasing the Business Valuation

  • How do I build value rather than simply grow the business?
  • Methods of valuation and what are the myths – P/E ratios, multiples and book values alone     mean less money for you
  • What should be my exit strategy and how do I time it for the best returns?
  • How do I present the financial data properly?

2. Packaging my Business – Getting it Ready for Sale

  • Starting to see your business through the eyes of the buyer
  • How can I best explain the company’s past; documenting its future potential
  • How can I create documentation that show the best value

3. The Sale (and / or Merger) process

  • What are the steps to take you from the start of the selling process to a successful close
  • What are the common and costly pitfalls to avoid

4. Explaining the jargon in real terms

  • There can be a lot of jargon involved and it is best to have this explained beforehand – CAPM, discount rate, EBITDA, and many more

5. Identifying and Approaching Buyer

  • How to identify and approach the right buyer
  • Which buyers to avoid and why
  • Why big companies buy small companies
  • How do I improve my odds when dealing with sophisticated buyers who purchase several businesses each year
  • Why your most likely buyer may not be the best buyer

6. Negotiating and Structuring the Deal

  • Negotiating mistakes to avoid
  • How professionals may get the best price in the shortest time
  • Managing multiple buyers to obtain the highest possible selling price
  • Deal structures designed to give you more cash with less risk

7. Forms of Payment

  • Making your business “pay you” even after you exit
  • How to increase the total price by using royalties license fees, consulting fees etc
  • Important legal and tax consideration
  • Protecting your lifestyle and estate needs

Making the decisions required to plan for the sale or exit from your business is never a simple set of choices and you will need some guidance.   If you are thinking about your exit strategy or if you would like to explore how we can support you through your business journey, call us on 01844 319286 or complete the form below.

How can an exit strategy benefit your future?

Like many business owners, you have devoted immeasurable amount of work and resources on developing your business. When you are busy with every day operations, it’s difficult to find the time to think about your exit strategy or retirement plan. Developing an achievable exit strategy is an essential task and too few owners give it proper consideration. An exit strategy can benefit your future. It can help you realise your businesses full potential whilst maximizing its sale value.

74% of entrepreneurs in the UK risk long-term business success by not giving proper thought to their exit strategies’ Deloitte Entrepreneurship: UK 2008

With all that you have invested, doesn’t it make sense to plan an exit from your business to protect your future?

What is an exit strategy?

An exit strategy is a plan on how you intent to leave the business. We know this is not as easy as it sounds. Your business has been a significant part of your life and dreams. Contemplating a future apart from it can be difficult to visualise. As hard as it may be, you need to start thinking about your own goals, targets and timescales to ensure your exit is within your control.

What should an exit plan include?

Your exit plan can be a simple one page document but should include:

  • Your preferred exit option
  • Deal Structure
  • Timing
  • Preferred buyers
  • Business valuation considerations
  • Actions

The key is to understand that an exit is a process that may occur over many years and there’s more exit options than simply selling your business. For example you may choose to set up a management team in order to take a back seat while receiving a regular income. To understand more about the various exit options, we recommend you read this blog 

An exit strategy ensures your vision of the desired outcome is achieved and helps to minimise the risk of failure or disappointment.

Carefully planning your exit from your business has huge benefits:

  • exit your business at a time of your choosing, when the business is doing well and the market conditions are advantageous
  • mould your business into the ideal shape for your chosen exit option – maximising the value you get from it
  • prepare successors if they’re coming from within the business, this could be a family member or part of your management team
  • prepare the 2nd tier management team, if you wish not to sell but draw a regular income from the business
  • make your business more appealing to potential buyers, if you wish to sell

If you don’t have an exit plan in place, we would recommend you think about creating one now, even if you expect to work for another 10 -15 years. Preparing a exit strategy is good practice and can help shape your business to achieve your future plans for life beyond your business. To help improve your chances of a successful exit we have complied a short 10 point checklist. Download here 

Take control now to get the maximum value out of your business by contacting us to arrange for a free appointment.