There are about 1.3 million small and medium sized businesses in the UK.
More than 90% of those businesses are not currently in a position to be able to be sold.
Of the 10% that are in a position to be sold, greater than 80% won’t sell.
Of those that do sell, less than 5% will sell for the expected valuation.
Every business owner will exit their business at some point, whether they close the business down or sell to a new owner. It is never too early to be thinking about how you will exit your business.
Causes
The main reasons business owners can’t sell their businesses are:
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They don’t plan to, so don’t dedicate the time to make the business attractive for a sale
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They don’t realise it is an option for them
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They don’t understand what is expected of them or their business during and after a sale
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They don’t work on the scalability of the business, and don’t make the business able to operate without them
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Time and effort is not focused in critical areas to make a sale attractive
When a business is first started, the owner wears many hats, covering all aspects of the running of the business. They are the managing director, marketing director, finance director, sales director, everything!
Overtime, as the business grows, new people come into the business and responsibilities are shared, but many small business owners will operate the majority of the running of the business. This may save money at the time, but makes selling a business hard, or at least reduces its value.
If you can’t step out of your business for six months and leave it running, then you are too key to the operation, and that will greatly affect the valuation. If you have the only relationship with your customers and suppliers, then the new owner is taking on a larger risk when you step out of the business, and the valuation will reflect that risk.
Begin With The End In Mind
What does your business look like just before a sale?
What makes your business attractive to a potential buyer?
By thinking about what the business needs to look like at the end, we can work out a path for it to get there.
Planning for an exit is good business strategy and is simply scaling up the business. It will help focus your efforts on systemisation and delegating responsibility. It will also help you cover off risks that the new owner will be concerned about, such as health and safety, staff contracts, supply chain etc.
How We Can Help
The financial side of your business must be in order before a sale. The reporting must be accurate and will be an area a potential buyer scrutinises in detail.
We can work with you and your business to identify key risks that will affect a potential sale and the final valuation of your business.
We will help you envision the end result and create a plan to move towards the end goal.
With our Virtual Finance Director (VFD) service we will support you by showing you how key decisions are likely to affect the business and how they do affect the financial performance of the business over time. Financial performance is a key factor in any valuation.
We will report on the financial performance of the business either quarterly or monthly and give you a summary of the performance to help you drive the business towards the end goal.
We can conduct due diligence on your company, covering off what a potential buyer will look for and expect to see.
If your finance department and processes are not accurate and tight, then the reporting will be meaningless, and you won’t be able to gauge if you are moving towards your goal. We will help you build the right systems for an effective finance department.
Regular reviews and holding you to account means a more successful businesses and a more successful exit.
Please contact us here if you would like to discuss selling your business or moving the business towards a sale, even if this is 30 years away!
