It’s that time of year where we look to the future and think about our plans, and for older business owners, that may include deciding when to retire, and how many more years to work in your business.
We spend many hours with financial advisers, looking at how best to save for our retirement, building a pension, deciding upon investments and returns. Yet the biggest asset for many of us is our business, and the time spent ensuring we maximise that value is often lost, in amongst the day to day running of the company. Years go by, and we assume we are increasing our business’ worth all the time, but just how valuable is your business and how will you practically achieve that when you exit?
Here are 5 points to consider:
- How are you going to exit? If you are selling the business, who to? Is there a trade buyer who is already showing interest, or is there sufficient merger activity in your sector for you to assess if your business meets an acquirer’s typical parameters? Have you got anyone to sell to in your trade or should you be considering an internal buyer, maybe someone who already works for the business, or a candidate you may have to yet identify and recruit? The more potential buyers you have, the more chance you have of maximising the chance of selling your business for the value that you believe it is worth.
- When are you going to exit? This will of course be a personal choice, but you should also have an eye on the landscape in your sector. Is there consolidation activity already? If so, don’t miss the boat! Once a purchaser has made a few acquisitions, they won’t be able to handle any more whilst they integrate and settle their new group. Is there competition from overseas on the horizon or are there new products and technological advances in your market which could affect your valuation in a few years? Would it be preferable to sell earlier rather than later? Carry out some research and ensure you have facts, rather than just gut feel.
- What does your business look like to a potential purchaser? Is it a risky proposition, or is it a well-oiled machine that generates profits without any hassle, even without you being there. The more systems and efficiencies you can implement, the more it appears that the business can stand on its own two feet and will calm the concerns of a buyer.
- Can you be seen? If an overseas buyer, for example, was looking for a company in your sector, how would they find you? Ensuring a good web and social media presence, being a member of the trade bodies, winning awards or having positive mentions in the trade press, all contribute to your profile. Make sure you can be found!
- Make a plan and be organised. Once you have reviewed your business from the point of view of selling it, rather than running it, you may recognise that changes need to be made to ensure it can be attractive to as many potential buyers as possible, and achieve the highest post-tax value when you sell your shares. However, these changes don’t all need to be made at once, and a good corporate finance adviser can help you prioritise with a timescale for the project, so that it doesn’t become overwhelming, but carried out fully, will allow you to mould your business to your ideal purchaser.
So hopefully this has provided an overview of the areas you need to think about. To find out more detailed information for your own business and situation, get in touch with Sarah Hartshorn or Mark Bramall and ask about their Exit Planning services. Preferably before you are another year further on and considering the same questions over again! Have a lovely, relaxing break over this festive period, and let’s be ready to focus on achieving our plans in the New Year!
Special thanks to Kirsty from the Corporate Finance Network (of whom we are members of) for this blog post.