Selling Your Business – Goldmine or Minefield?

By Wendy Turner-Hargreaves

 

In a recent survey conducted by the FCSA 25% of business owners surveyed said that they had no retirement plan or fund in place – nothing – and only 4% planned to sell their business to fund their retirement.

So what’s your plan? And if you’re one of the 4%, do you know how much your business is worth?
You’d be surprised how many business owners don’t.

When you’ve spent years ploughing money and time into building up your company it makes sense that you should be rewarded for your hard graft. The late nights, long days, and sheer effort required to keep a business going.

Of course, your business needs to sell, and for a price which will provide you with enough funds to retire, or take a back seat at the very least. But only one in 5 businesses on the market are actually sold.

The reasons for this are varied, but the key ones are:
1. Lack of preparation.
2. Inadequate paperwork/financials
3. Reliance on the existing owner
4. Buyer and seller synergy
5. Unrealistic price expectations

It makes sense that a lack of preparation, coupled with poor financial records, would hinder the sale of a business. For such a sizeable transaction the due diligence process is critical, but this is all within your control. If you plan ahead for your exit and have good reporting procedures in place, you’ll be sufficiently prepared for the scrutiny.

But what if you’re the engine of the business? How will it motor on if the engine is removed?

This is harder, but it’s not insurmountable. In fact, many businesses find the experience injects a new lease of life into a business once the owner departs. Having an excellent management team who can take the business forward is key here. You’ll want to protect the legacy of your company and leave the business is a strong position when you retire. Planning for that now will help you to hand over the reins with confidence later.

It’s time to build a new engine.

Would you sell to someone you didn’t like, who didn’t share your values or who you felt wouldn’t cherish the legacy of your company? It’s impossible to put a price on rapport but people really do buy from people and the same applies when you’re selling too. It’s not unheard of for a vendor to accept a lower offer from a purchaser they liked rather than a higher offer from someone with whom they had no synergy. Also, it’s highly likely that you’ll care about the future of your company and you want to know it will be in safe hands.

The final hurdle to selling brings us back to where we started. Money. How much do you need and is your idea of what your business is worth realistic? If this interests you take a look at our article ‘Magic Number’ which investigates this further.

There are several ways to value a business, usually through applying a multiple to the turnover or profit. Other factors are less tangible such as the customer base, projected sales and the quality of its employees. But at the beginning of this process you’ll be looking for a rough idea to help you think and plan ahead.

Selling needn’t be a minefield.

 

 

At Fidelis, we provide stress-free solutions to business owners looking to exit their company. We have developed a tool that can assist you as you take the first step towards planning your exit from your business. It’s completely free, and in a few clicks you’ll get an estimated valuation of your business.

Click here to use the business valuation calculator now:

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