Buying and selling a business

For Entrepreneurs and SME business owners more generally, a lot of hard work goes into creating a successful business over a long period of time i.e. long days, late nights, working weekends, missing birthdays, stress, cashflow issues, having to deal with emergencies when on holidays etc.  

So when after a number of years, you finally achieve that element of success and financial security with your business, so why you give up on the ‘extra’ financial rewards that you have worked so hard to achieve – by NOT thinking about or considering ‘exit’ options for your business ?

Some recent business statistics indicate that ONLY 30% of SME businesses ever reach the point of ‘exiting’ their business, and only 5% actually have a successful ‘exit’ ! And remember a successful ‘exit’ means that you are getting paid TWICE i.e. you receive payment for the ‘value’ that a third party has considered that your business is worth to them.

Every businessowner WILL exit their at some point, so isn’t it better for YOU to exit your business rather than you be ‘exited’ from your business?

DISCUSSING BUSINESS EXITS

When we start discussions about a business exits, there can be a fear that this means that the business owner will be leaving the business imminently, but nothing could be further from the truth.

Thinking about, considering AND planning for your exit from your business is actually a positive for you AND your Team, as it will result in benefits for all:

1. reduce the stresses and workload on the business owner  
2. increase the responsibilities and opportunity for your Team members (to their benefit)
3. create a more stable and resilient business, meaning a more profitable business while working towards your planned exit, AND
4. simplify the exit process when it occurs (in whatever format), and more likely minimise the issues and challenges that may reduce the ‘value’ that can be achieved 

In broad terms, there are a number of exit options for a business owner to exit their business: 

• through ill health or retirement
• by selling it to the existing Team i.e. via a management buyout (MBO) process
• by selling it to a competitor or a business within your sector (trade sale)
• by selling it to an investor, whether an individual, venture capital trust or private equity acquirer

By considering how you want to ‘exit’ and planning for it ahead of time, you can generally ensure that you avoid getting NO value for your business (option A), and potentially identify where your purchasers may be.

KEY ISSUES FOR BUSINESS OWNERS

From a purely financial point of view, there are a number of really key issues that need to be considered and planned for by a business owner in order to maximise the ability to exit with the mosr business ‘value’, which includes the following 

1. the business cannot be dependent on the business owner i.e. YOU – there is little value in this for an acquirer
   
2. consider your exit options and start planning at least 3 to 5 years ahead
   
3. ensure that ALL of the basic financials are in order and can be simply and easily reviewed and checked e.g. accounts software/systems, annual accounts, VAT returns, CIS Returns, payroll data, corporation tax returns etc etc 
   
4. understand that further analysis of your financial information will be required by a purchaser e.g. business analysis (who are your customers, how long have they been customers, are they contracted, what are your services, what are your margins, how successful is your marketing etc), key performance Indictors (KPI’s), management accounts, budgets etc for historical years AND for 1 / 2 years ahead as well
   
5. any disputes, issues with HMRC, employees, customers/suppliers will be detrimental to the value of your business. Similarly issues around shareholdings and ownership can be problematic.
   
6. ensure that the business owner’s tax planning is in order ahead of the exit e.g. can you obtain entrepreneurs relief and/or do you qualify?

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