As long term, experienced (and successful) advisors in this space, this is probably not the most common question – that’ll be “what’s it worth?” – but it should be.
The answer, in a word – PREPARATION
It’s preparing the owner for life after the business, but just as importantly, and the bit that’s usually lacking, is preparing the business for life after the owner.
There are three headlines here:
- Reliance on the owner, perceived or otherwise, usually because there is inadequate autonomous second tier management in place
- Lack of systems and / or established processes. Almost the same as point 1, with the same root cause and, funnily enough, the same issues
- Poor “corporate governance”, record keeping or adherence to financial requirements
These are all addressable of course, but in the ideal world takes 5 years:
Year 1 – Strategise, plan, start to implement
Years 2-3 – Tweak, imbed, get real evidence that it is robust and sustainable
Year 4 – Start the exit process, which typically takes 6-9 months
Year 5 – Be clear of any ongoing liabilities (warranties) & have received any earnout or deferred due
If you do years 1-3 correctly than selling the business may not be the best option, or you could build a management team as part of the plan and sell it to them.
Breaking this down into a few more granular points, the top 10 would usually look something like this:
- Get the valuation right, and aligned with expectations, plans etc
- Have good, up to date MI, monthly, with forecasts, pipelines
- Have a compelling (true) story about your motivations
- Think about the buyer and be attractive to them
- Understand the likely structure and its implications
- Financial, human, transition, objectives
- Be buyer ready in every respect
- Negotiate wisely
- The best buyer is often not the highest valuation
- Get your timing right
- Proof of your strategy
- Be prepared in every respect, but not least, be prepared to let go!
Aside from the deal there are three important areas:
- Make sure the buyer is someone you can deal with
- Align all objectives – buyer, seller, manager, staff, Companies
- Plan must be truly mutually beneficial
- Ensure the resources exists to deliver the plan
Between us we have completed around 200 deals, and advised many more companies and Directors on these issues. But you always learn more from those that fail because it is likely there will be one or a small number of critical points that have derailed the process.
The anecdotal statistics of companies presented to market failing to sell is an appalling 80% – whereas we sell about 80% of our engagements. Work well on these points and dramatically improve your chances of a happy ending!
As always, good luck with everything, stay safe and if we can help in any way we’re happy to do so.
email us: firstname.lastname@example.org
call us: 0118 338 1818