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Masterclass: Creating shareholder exit value – 13 July 2017

Masterclass: Creating shareholder exit value – 13 July 2017

Creating and maximising shareholder exit value is fundamental for any business owner hoping to reap a substantial and well deserved financial reward from selling the company.

Find out how at a Business Owners Masterclass. Designed for time-poor entrepreneurs, these informal, interactive events provide a valuable opportunity to benefit from the experiences of other business owners and advisers, who will share their knowledge of buying, growing and selling businesses.

Our expert panel (details below) will cover Timing, Valuations, Acquisition Criteria, Deal Structures, Tax Planning, Negotiations, Confidentiality and Wealth Management post-sale.  They will explain what’s involved in selling a business, the legal and financial issues to consider, the factors that impact price and what you can do to boost sale value and get your business “exit ready”.

What’s more, all delegates will receive a free and comprehensive valuation report – an essential pre-requisite for exit planning.

BOOKING DETAILS

Date:    Thursday, 13th July 2017

Time:    Registration 08:30 for 09.00 start. Ends 12.20

Venue: Quilter Cheviot Investment Centre, Parker Street, London, WC2B 5NT

Breakfast rolls and coffee/tea provided during registration 

EXPERT PANEL

Ivan McKeever, ex CEO of Styles and Wood Group and an active acquirer and investor.

David Little, Bishop & Sewell – an experienced corporate lawyer who advises on acquisitions and disposals, private and public fund-raisings

Philip de Lisle, an experienced acquirer and business owner who leads the interactive workshop session.

David Gould who sold his business and will share what he learned from his experience.

Rob Goddard, CEO of Evolution CBS with 15 years M&A experience and 337 successful transactions.

Steve Barry, Client Director of Evolution CBS – an expert in building successful organisations who has worked extensively with SMEs and Mid-Corporate organisations.

To register your interest, please complete the form below:-

Latest update for Price/Earnings Multiples for the Engineering Sector

Latest update for Price/Earnings Multiples for the Engineering Sector

One of our Valuers has just advised that the FTSE Engineering Industry Sector P/E Ratio at close of business on Friday 21 April 2017 was 33.43.  So applying a 50% discount for an privately owned (unquoted) business provides a ratio of 16.7.  But, before anyone reaches for the bubbly, an element of actual or perceived risk needs to be built into the final figure used.  Conversely, if the business is a low risk, highly profitable and stable business with excellent future prospects, then the consideration could be given to reducing the discount.

The Investors Chronicle recently carried an article indicating that with the dramatic rise in the P/E ratios over the last 12 months, care should be taken when these higher ratios are used in business valuations, a view which we would fully endorse.  A year to 18 months or so ago we were looking at similar FTSE P/E ratios in the low 20’s giving typically adjusted ratios for valuing engineering businesses at around 12.  The reason for the large rise has been more to do with the continuing fall in interest rates and also the fall in the £ than to do with improved business earnings.  With falling interest rates, investors are seeing and more importantly accepting lower yields as the norm.  Over the last 1 to 2 years, yields appear to have generally fallen by as much as 2% to 3%.  Industry with export business has benefited from the fall in the £ which is seen by the market as potentially boosting net earnings, hence the rise in the market price of the share.  As a consequence, the P/E Ratio rise for the Industrial Engineering Sector has been boosted by those companies with export markets.  It does rather cloud the position with those businesses that have predominantly UK related business, with little or no overseas sales. Here the P/E ratios would not have seen such an increase. Unfortunately, the FTSE figures are based on a basket of around 20 large quoted companies.

If you decide to rely on an EBITDA valuation basis for a business the same problem will arise on the multiple applied.  At the end of the day, price is normally determined by the risk factors, affected by items such as spread of turnover/customer base, niche products & services, repeat business with on-going contracts, reputation, strength of second tier management, not to mention financial return on the investment.

Of course, when selling a business, a broker should aim to create a competitive bidding environment amongst interested parties, focusing on all the USP’s  – which then becomes less about price and more about value.

For your independent business valuation report, please CLICK HERE.

Free: The 200 Minute Business Masterclass – 10 & 25 May 2017

Free: The 200 Minute Business Masterclass – 10 & 25 May 2017

If you received an offer for your business today could you be sure the price is right?
What would you do if that offer meant accepting an extended earn-out?

If a competitor approached you to buy your business should you accept?
If you were interested, how much information should you disclose and when?

In just 200 minutes, this Masterclass will provide the answers to these and a host of other questions; in fact they will tell you everything you need to know about selling a business, how to boost its sale value and get it “exit ready”.  What’s more, delegates also have the option to receive a free 29 page valuation report, which normally costs £1,200.

This confidential, interactive session lets you discuss the real challenges of selling businesses with experts who have seen it all before.  And we mean “seen it all” – the panel includes professionals like Philip de Lisle who has started 11 businesses, acquired 15 and sold 7  and Ivan McKeever, an experienced acquirer, investor and CEO of public and private companies; Ivan knows what acquirers look for and what they avoid and he will share his experiences to help delegates add value to their businesses.

Could this be the most useful 200 minutes you spend? Here’s what one delegate, the CEO of an International Payments company, said after a previous event: “I have been to a few seminars but this Masterclass is the best event I have been to, by far.”

There are two events in May and you can register your interest at either one on the forms below:-

Dates & Venues

Thursday, 10 May 2017 – registration & refreshments: 08.30

Event runs: 09.00 to 12.20

Location: London EC2R 7HE

Cost: Free & Breakfast rolls included

Masterclass: Creating shareholder exit value - 13 July 2017

Thursday, 25 May 2017 – registration & refreshments: 08.30

Event runs: 09.00 to 12.20

London EC2A 1AD

Cost: Free & Breakfast rolls included

Free: The 200 Minute Business Masterclass - 25 May 2017

New London Based Business Broker – Langley London Ltd

Langley London LtdStirling is pleased to announce that it has bought back the name of Langley London Ltd to the Borough High Street, near to London Bridge Station after an absence of nearly 20 years. The business will trade as a London based Business Broker, predominantly for selling businesses with a turnover of over £1m.

Roger Smith, Director of Stirling and Langley explained that a greater presence was required in London, offering well established businesses the opportunity to be sold using a proven method of finding suitable strategic “target” buyers. As with Stirling, the business will use a sensible fee structure without onerous terms & conditions, offering Vendors value for money for a premium service.

Langley London Ltd was for many years previously associated with the Borough High Street, having been set up at 161 Borough High Street as far back as 1920 (originally as Merchant Shippers)!

Enquiries can be made by phone on 020 8012 8450 or by email: info@langleylondon.com

FREE MASTERCLASS – How to prepare for a successful business sale – 26 April 2017

FREE MASTERCLASS – How to prepare for a successful business sale – 26 April 2017

The UK M & A market this year is at its most active since 2008 and companies that have prepared for sale, are achieving premium prices. Here is an opportunity to join a Business Masterclass on how to prepare for a successful business sale –  arguably one of the largest transactions a business owner will ever make.

In just over 3 hours (perfect for time-limited entrepreneurs!), delegates will gain a wealth of information from industry professionals who will demonstrate proven techniques that maximise shareholder value and lead to exceptional exit deals. Delegates also have the option to receive a free valuation report worth £1,200.

The Masterclasses, which are free to attend, are held in complete confidentiality and refreshments are provided, so in exchange for just a few hours of your time, you could significantly increase the value of your business for when the time comes to sell.

Amongst the topics covered are:-

Subjects covered include:-

  • How businesses are valued
  • What acquirers look for & what they avoid
  • Different exit options
  • The different types of deal structures
  • How to time a sale
  • What you can do in the short to medium term to improve shareholder value
  • How to avoid the major deal killers
  • How the sale process works

Dates and Venue

 

Wednesday, 26 April 2017 09.00 – 12.30 (registration at 08.30)

London
WC2R 0BU

To register your interest, please complete the form below:-

FREE MASTERCLASS - How to prepare for a successful business sale - 26 April 2017

Seminar: “Developing & Selling a business Successfully” – 4 May 2017

Arrivista Business Coaching, Stag Capital Finance and Stirling have arranged a unique event in Worcester for Thursday, 4th May 2017, which is solely for the benefit of Manufacturing & Engineering Businesses.

This complimentary event will include ‘Achieve Outstanding Business Success’ – a popular business development seminar by Arrivista, where you will walk away with a wealth of new tools to put into place immediately, encouraging better time mastery, more effective marketing, a more motivated and focused team, increased lead generation, conversion rate and sales, maximised profit and much more. Where Finance to develop a business is concerned – Stag Capital Finance will be running through all the funding options that you may not be aware of! 

Free up Time, Build Great Teams, Grow Profitability and Maximise Business Value

The aim of this seminar is to help businesses from Manufacturing/Engineering type industries become more profitable and to run more efficiently, thereby making the business more valuable and saleable for when the time comes to sell. Stirling will be giving away important information on selling your business successfully for maximum value, which will enable you to plan more clearly, with the ultimate end game in sight.

After the seminar, you are welcome to stay for a light lunch and gain the opportunity to network with other like-minded business leaders who will be attending the event.

All attendees will receive a free “Guide to Selling a Business Successfully” and will be invited to the following:-

  • An complimentary 1:1 coaching session (which has a value £595!)
  • Involvement with a quality ‘learning’ community
  • Access to, and support for business development funding

When? Thursday, 4th May 2017, 9:00am to 1:00pm

Who should attend? The seminar is designed for business owners and senior decision makers of manufacturing & engineering type businesses.

Where? Unit 1 Crucible Terrace, Crucible Business Park, Woodbury Lane, Norton, Worcester WR5 2BA 

How do I book a place?

Please complete the form below and we will confirm your booking asap:-

 

CEO Exit & Succession Planning

Exit PlanningCEO Exit & Succession Planning

Business owners face a number of challenges when they try to sell or transition out of their business. In fact, four out of five businesses that are listed for sale never get sold – and with the baby boomers preparing for retirement, there is a risk of a glut of businesses on the market for sale.  Whether you want to sell your business, hand it off to family members, or transition it to your leadership team, you have to be ready.

Stirling Business Transfer Specialists & The Business Coaching Company’s CEO Exit and Succession Planning Program is designed to help you prepare and achieve the successful sale of your company.

Here are three reasons why you should join:-

1. STRENGTHEN YOUR BUSINESS TO MAKE IT MORE PROFITABLE, VALUABLE, AND ATTRACTIVE TO A PROSPECTIVE BUYER

During each meeting you will discover new strategies and tactics to strengthen your business, increase profits and cash flow, and ultimately make it more valuable. That way, selling or transitioning your business becomes seamless.

2. TAP INTO THE WEALTH YOU HAVE CREATED IN YOUR BUSINESS.

You have spent years and lots of sweat building your business. Make sure that it is set up for an easy transition and that you can get access to that wealth. Many business owners are going to be in for an unpleasant shock when they find out that their wealth is trapped in their businesses, the business is not as valuable as they thought, or simply no-one will buy it because its not a good investment.

The CEO Exit and Succession Planning Program is laser-focused, helping you unlock the wealth your business has generated.

3. HAVE MORE TIME TO ENJOY OTHER PARTS OF YOUR LIFE.

Many business owners feel like they spend too much time in their business and that the business is too dependent on them. The CEO Exit and Succession Planning Program sets you up to have more time, spend more time as a CEO (instead of a “fire fighter”) and enjoy better balance in your life. This program will help you restructure your business to run without you.  Then you will have something easier and more valuable to sell.

 “…each meeting covers a different topic to help you strengthen your business and prepare for exit/transition…”

With structured content and thought provoking exercises plus an opportunity to hear from various experts, you and your coach will develop unique action plans to increase profits, cash flow, and have maximum options when it comes to tapping into the wealth in your business.

Whether you are looking to transition out of your business in the next year or two, or want to develop a strong foundation now for the future,  The CEO Exit and Succession Planning Program will deliver ongoing value. Each meeting covers a different topic to help you strengthen your business and prepare for exit/transition.  The program is designed around your busy schedule and is only open to business owners with an established profitable business.

This program is 100% results driven:-

  • 1:1 Exclusive Support
  • Convenient to your busy schedule.
  • Practical, learn best-practices for building a strong business that is not dependent on you and that is attractive to buyers, investors, and/or your next generation of leaders.
  • Ongoing support and accountability throughout so that you achieve your goals of a high value business sale.
  • Develop strategies to make your business more profitable and valuable while having more time to spend outside the business. Structure the business to run without you.

“Russ is a powerful executive coach and businessman, bringing forth his commitment to helping clients achieve business results with clarity and focus. His ability to move a conversation forward, to ground those involved in the conversation, and to pinpoint with accuracy the root of a problem makes him a powerful practitioner…”  – Donna Karlin – International Speaker & Author

“Russ has a knack for understanding the business issues at hand with his sincere, inquisitive and personable approach. I highly recommend Russ as his experience with strategy, turnarounds, restructuring, and operations is sound and will be of great benefit to any business seeking advisory services in this regard..”  – Kim La Plante, Microsoft Management Consulting

For further details, venues and to register your interest, simply fill in the form below:-

 

How to Maximise Business Value

Should you be thinking of selling a business, there are many things that can be done to maximise your business value, as part of a business development plan. But whether or not you wish to sell, it is as well to remember that many business owners do not plan at all, which may account for 3% of business owners with a written business plan, earning more than the other 97% added together! Here are ten ideas to consider if you wish to increase your business value prior to selling and a further ten, when placing your business up for sale:-

Maximising Business Value (Pre-Sale)

1) Focus on selling. Nothing happens unless selling is taking place. Concentrate on selling the benefits of your products and services rather than just the features of your products alone. You don’t have to have the best products but an “outstanding service” can lead to an “outstanding performance”. Selling is a numbers game (it is easier to approach twice as many prospects than to suddenly become twice as good a salesperson) so make sure the activity level is going up – not down! Companies get strung along into receivership because they can’t sell or can’t get the money in. Ultimately, make sure that the sales process is not reliant on the business owner – businesses are difficult to sell “if the business owner is perceived to be the business”.

2) Review your sales plan. There are only 4 ways to grow a business – (i) Growth by acquisition, (ii) Increase number of customers, (iii) Increase transaction values by selling more products & (iv) Increase frequency of sales. Make sure you understand your “unique selling points” and write them down – if you don’t understand them, how can your customers? Growth by acquisition can help speed up geographic expansion through acquiring an already established customer base, product lines & services but care needs to be given to potential cultural differences between two organisations, which may affect customer & employee retention.

3) Increasing sales/profit record. Aim to demonstrate consistency, preferably with increasing sales/profits, it will help strengthen your negotiating position, increasing value and one less reason to talk the price down. Remember that loss making businesses are difficult to sell – if possible, turn the business around first and then sell.

4) Develop a 3 year plan. Try to develop a realistic budget for the year ahead with a further two years of planning ahead, updated each year as part of your business plan. Ideally, you need to know where your future sales revenue and profits are coming from – likewise when you come to sell the business, the buyer will want to know that too!

5) Review the marketing plan. Marketing can be best summed up as “identifying and supplying a customer’s needs at a profit”. Treat marketing as an investment rather than a cost and work out how much you would be prepared to invest in order to gain a new customer. Review new markets for existing products or new products for existing markets (be wary of new products for new markets as this is where the greatest risk lies). Try, test and measure at least 10 different marketing methods to gain new enquiries and customers – cut out the ones that don’t work and invest heavily in the ones which do. Remember the 5 WAYS in which you can have an influence on:-

Number of Leads x Conversion Rate = Customers x Number of Transactions x Average Sale Value = Turnover x Profit Margin = Profit.

6) Review the Customer Base. If your business becomes reliant on any one customer, the risk goes up and the value goes down. Make sure the risk is spread, with no more than 20% reliance on any one customer. If possible, market products and services to a broad range of industry sectors eg Public & Private Sectors to reduce the effects of any down-turns. Also, try and cultivate customers who are prepared to agree to “rolling contracts” (eg maintenance & service contracts or retainers) so that sales can be achieved with less effort, whilst become more predictable – businesses with rolling contracts in place are more saleable for when the time comes to sell.

7) Review prices and margins. The more profit you generate, the more valuable your business will be. People think customers buy on price but they rarely do – only 10 to 15% of the public buy on price as what customers really want is value for money – the prouder the price, the better the deal! The most successful businesses are customer led; they don’t necessarily have the cheapest products. Put prices up if discounts are required. Pricing is key to profitability but often misunderstood – for a 30% Gross Margin business, if you reduce prices by 10% then you will need a 50% increase in sales just to stand still; a 10% increase in price, you would need a 25% drop in sales volume before you start losing out!

8) Review the Management Structure. Businesses are difficult to sell if the Business Owner “is the Business”. The 3 main roles are Make it (Ops), Sell it (Sales), Count it (Finance). Find ways of making sure the business is not reliant on the owner – look at the management team to see where additional responsibility can be taken on or consider employing someone to take on tasks to enable the business to become more “independent” of the owner rather than totally “dependent”. If the senior team is too small, consider taking on a non-executive Director or Consultant to benefit from their outside knowledge & experience and offer them as “continuity” when negotiating the business sale. Make sure Board meetings are held regularly with an Agenda and Minutes/Action Points recorded – don’t miss “future business development”.

9) Value your assets. The greatest asset in any business is People followed by Customers. But make sure you have “the right people, sitting in the right seats, before you start driving the bus” in the first place! Make sure everyone has a Contract of Employment and Job Description in place (these will come up in due diligence, when selling). Look after your key people – losing them at the time of selling a business will probably jeopardise the deal. Make sure that you are aware of the values of your tangible assets such as property, plant and equipment. A fixed asset register is often essential when discussing values with a buyer. Other assets include patents and intellectual property rights, which will all add value for when the time comes to sell.

10) Make sure your information is up to date. A well run and administered business will increase the perceived value and nothing puts off potential buyers off than lack of up to date information. This includes Statutory Accounts, Management Accounts, Order Book Values, Staff Contracts of Employment, Staff Handbook, HR records, Job Descriptions, Copies of Leases, Asset Lists, Business Awards/Certificates etc etc.

Maximising Business Value (Commencing the Sale Process)

1)  Make sure you really do want to sell! A serious prospective buyer will be interested in the reason behind you wanting to sell the business.  And if it’s not a compelling reason, they will probably go elsewhere. You need to think through the reasons for selling and how your life will be, once the business has been sold, so make sure your business plan is aligned with your personal aims and objectives. No buyer is going to want to waste time and money with business owners who don’t know whether or not they really want to sell, so understand the reasons why you want to sell and then make a definite decision. Selling a business is a team effort, not just between the buyer and seller but also between the professional bodies involved, often requiring a great deal of co-ordination in trying to agree time-scales, providing information, clarifying terms and driving the deal forward to Completion. You, not just the buyer, need to be fully motivated to make sure this happens!

2.  Make sure you check the background to your buyer. There could well be many people who think they want to buy your business but many of them could be just be looking out of idle curiosity or not even have the means to do the deal. There’s no point in going through all the hard work of agreeing terms and fine tuning the contract of sale if the funding can’t be secured before legal completion! Check out the credit worthiness of your buyer and don’t be afraid to ask for proof of funding – your business broker should be able to do this for you.

3.  Know how much your business is worth.  The business may be worth as much as someone is prepared to pay for it but this does not place you in a strong negotiating position.  Make sure you know how much you business is worth by taking out an independently prepared, professional business valuation report.  This will help you to understand whether or not it’s worthwhile trying to sell the business in the first place and enable you to substantiate the price you have in mind. Once you understand the price or value of your business, you may need to take tax advice to ensure that any potential deal is tax efficient. Remember, the books will be the books and whilst a Valuer can look at adjusted profit figures, don’t expect a buyer to pay for undisclosed business – if you can’t record it, you can’t pay for it!

4.  Make sure you know your numbers. Many business owners are interested in selling their businesses but struggle to know what the balance sheet is worth, let alone the turnover or profit figures. There is a balance between knowing basic information and giving the impression that you know almost everything that there is to know about the business, as you may end up being perceived to be the business. Don’t guess the figures and at the very least, make sure that you can get your hands on the information required and have summary sheets to hand. Another area which is good to know, is the likely level of business for the year ahead, three years, even better. Buyers are especially interested in the future business prospects and so it greatly helps to have a considered opinion, rather than second guess. False information will lead to uncertainty and reduce confidence in progressing the deal.

5. Identify and understand your USP’s.  Like any other sale, there are two main points for sales people to consider: “features” and “benefits”. In general, buyers are not really interested in how long you’ve been in business or what great customer service you provide – you should be doing that anyway! Buyers are only interested in “what’s in it for them”. Before selling your business, you need to place yourself in the buyer’s shoes and identify all the things that would create value for them because if you don’t fully understand them, how can you expect the buyer to know, as they will not appear on any set of accounts. Ideally, you need to write down all the things that make your business unique (ones which can be truly justified) and use them in the selling process to drive up the perceived value. Invariably, there will be weaknesses identified within your business but this is where a negative can be turned into a positive – the weakness could become a selling point as “an opportunity for future development”, where the buyer might be able to maximise future growth.

6. Find several potential buyers. In general, it is best to aim for 6 potential buyers as offers could be double that of others, simply because businesses have more perceived value for different reasons, to different buyers. Even if you do have just one buyer, there’s nothing wrong in letting on that there are other interested parties to create a competitive environment, otherwise it’s difficult to negotiate a higher price, if the buyer thinks they have total exclusivity, before talking to anyone else. When you do accept an offer and have to grant exclusivity for the due diligence exercise, ensure that this is limited (60 days is the norm), so if the buyer does try to re-negotiate the price down to an unacceptable level, you can get the business back on the market, rather be drawn into a long, drawn out battle. Remember, that deals can fall through for a variety of reasons (funding being one of them), so if you can have other potential buyers on hand, you will stand a better chance of finally selling. Even before you decide to sell, record all unsolicited approaches – they may become useful one day.

7.  Don’t accept the first offer! If you are interested in securing the full or fair value for your business, it is always worthwhile declining the first offer, as people often want what they can’t have and if the buyer wants the business badly enough, they will soon be back with a revised, better offer. When advertising businesses for sale, it is always advisable not to give an asking price or a guide price and never disclose your bottom line price as this will be limiting offers to that level. Always best to invite “indicative offers”. NB Many business owners, do have unrealistic expectations about the price or value of their business, so again, put yourself in a buyer’s position and ask yourself, how much would you pay?

8.  Market the business for sale. Apart from having to be pro-active in marketing or advertising your business for sale, nothing puts a buyer off more than lack of information, once they have shown some interest. Ideally, the best initial document to provide is a Sale Memorandum or Information Memorandum (known as the IM), which will provide a good overview and background to the business, without giving away sensitive or highly confidential information.  Invariably, it will provide key financial figures and highlight many or all of the unique features about your business and list the opportunities for future business development. Make sure that you read and re-read the document to ensure that it is a factual and true description of your business, as false claims or statements will eventually be found out and undermine any potential deal. As business is done between people, the main objective is to provide just sufficient information in order to meet the buyer face to face. Prior to providing the IM document, a Confidentiality Agreement or Non-Disclosure Agreement (known as an NDA) should be put in place, as this will help ensure that everything can be kept as confidential as possible, without the risk of it being made public to your customers, suppliers and staff.

9. Be prepared to negotiate. Whilst there are deals where all the cash is paid up front, don’t assume that this will be the case with your business. Place yourself in the buyer’s shoes and start to realise that there may be an element of risk to be covered, finance to be considered, hand-over period to be agreed etc. A premium may be agreed if the business is funding the take-over, so best to keep an open mind on how the deal can be structured. Understand that there is a big difference between “deferred payments” and “earn-outs”. Deferred payments may have some form of security agreed, whereas earn-outs may be linked to the future profitability of the business, where you may have little or no control.

10.  Make use of Professional Advisors. No one likes to spend money unless they have to but with the careful appointment of professional advisors, they can actually save you a great deal of money. For instance, a Broker can help find you suitable buyers through their connections and lists of potential buyers and investors to place you in a competitive bidding situation; a specialist Corporate Lawyer will help protect you from unfair or onerous terms within the contract of sale; a Tax Accountant can help advise on the best ways to minimise your tax liabilities (before the sale completes) and a Corporate Financial Adviser can help make sure you are getting the right advice on when to sell and how to maximise shareholder value. Make sure that your advisors have the capability of meeting your requirements, can work to an agreed budget and work within your agreed time-scale.

Looking to sell your business? For further information, help and advice, please fill in the form below:-

New Business Planning Service

“The 3% of people with written business plans earn more than the other 97% added together!”

Whether or not you are wanting to sell a business, it is fairly well known that those business owners with a written business plan are far more successful than those who don’t. There’s one story that goes along the lines that a man was riding a galloping horse; when passing by someone, they shouted out “where are you going?!”  The reply from the person riding the horse: “I don’t know, ask the horse!” Most people (not just business owners) have no idea where they are actually heading in life, most have some rough idea in their head but leave everything to chance on how to get there. Others really do leave things to chance often saying “when I win the lottery…..!” and carry on with the same old habits.  And then there’s that quote from Henry Ford:-

“If you always do what you’ve always done, you’ll always get what you’ve always got.”

Of course, producing a written plan that is realistic and achievable, with action plans that are SMART (specific, measurable, accountable and time-measured) are not always easy to prepare, when it’s your own life or business that you’re trying to plan out. It’s far easier to be objective telling or suggesting to someone else what they should be doing! Many business owners for instance, like the thought of selling their business but have given very little thought to what they might do, once the business has been sold. Many deals have crashed, not just because the sale process wasn’t properly planned out in the first place or because the business owner decided to take tax advice right at the last moment. The business owner often pulls out of the deal when it has suddenly dawned on them that they’re going to give up everything they’ve developed over several decades and have no idea what to do with themselves once the keys have been handed over. No wonder one prominent business broker states that their commission must be paid in full, if the business owner pulls out of the deal, once Heads of Terms have been signed!

It’s easy to realise that everyone should really have a written plan of where they want to be and a good understanding of how they are going to get there. A written plan focusses the mind and assuming the plan is not put away in a drawer, it will remind us of all the action we need to take in order to reach whatever it is we want to achieve. With business planning, it is important that the business owner aligns their personal aims and objectives with the business, otherwise you may end up with the business dictating how you run your life and nothing much more. There’s plenty of business owners who end up sacrificing their “health for wealth” before they realise that they need to sacrifice some “wealth for health”. Unfortunately, many leave it too late.

The good news is that we can help! Our business planning expert is able to talk you through all the questions that you need to be asked and produce that all important written business plan – aligned with your own personal aims and objectives. You can get started now, by completing the form below:-

 

Avoiding mistakes Selling a Business

Research has shown that many business owners fail to achieve the full or fair value of their businesses when trying to exit, simply through poor planning and preparation. It’s not your fault if you’re making some of these mistakes but hopefully, there’s still enough time to learn from the experience of others……

You’ve had enough and so you’ve suddenly decided to sell?  The decision to sell a business should not be taken lightly as there could be many things to be done to try and make the chance of selling a business a lot easier.  Poor preparation without up to date accounts, legal entity records and other important paperwork will simply put potential buyers off.  Don’t think you can hide bad news or skeletons in the cupboard as these usually get discovered in the due diligence process – deal with the issues before you decide to sell. Struggling businesses with unrealistic financial forecasts are difficult to sell too.  Buyers often string loss making businesses into receivership so always work to a realistic time scale (it can take up to six months to find a buyer and six months to sell a business) – turn a business around first and then sell.

You are perceived to be the business?  Many owner-managed businesses are very successful and highly profitable, because the owner has “run a tight ship” and controlled everything down to the last penny. Which is great for maximising personal income, surviving recessions and avoiding management issues. The trouble is, when the time comes to sell, a buyer may well perceive “the owner to be the business” and once gone, the business will be gone too. And the Higher the Risk, the Lower the Value! If the business owner can plan in advance, delegate or take on someone who can manage the day to day business without relying on the owner, then the business will be a lot more saleable and more valuable.

You just have one or two major customers?  Just because you have  developed an excellent long term relationship with one or two key customers, it doesn’t mean that the buyer will! Ideally, turnover should be spread amongst the top ten customers but should the business becomes reliant on customers producing 20% or more of the business, then the element of risk comes into play, driving down perceived value. If the business is reliant on one or two key customers, a contract or rolling contract may help. Some buyers walk away from deals if they discover that the business is just too reliant on too few customers. The same could be said where key suppliers are concerned.

You’re not sure if you really do want to sell? A serious prospective buyer will be interested in the reason behind you wanting to sell the business.  And if it’s not a compelling reason, they will probably go elsewhere. You need to think through the reasons for selling and how your life will be, once the business has been sold. No buyer is going to want to waste time and money with business owners who don’t know whether or not they really want to sell, so understand the reasons why you want to sell and then make a definite decision. Selling a business is a team effort, not just between the buyer and seller but also between the professional bodies involved, often requiring a great deal of co-ordination in trying to agree time-scales, providing information, clarifying terms and driving the deal forward to Completion. You, not just the buyer, need to be fully motivated to make sure this happens!

You haven’t checked the background to your buyer? There could well be many people who think they want to buy your business but many of them could be just be looking out of idle curiosity or not even have the means to do the deal. There’s no point in going through all the hard work of agreeing terms and fine tuning the contract of sale if the funding can’t be secured before legal completion! Check out the credit worthiness of your buyer and don’t be afraid to ask for proof of funding – your business broker should be able to do this for you.

You are guessing how much your business is worth?  The business may be worth as much as someone is prepared to pay for it but this does not place you in a strong negotiating position.  Make sure you know how much you business is worth by taking out an independently prepared, professional business valuation.  This will help you to understand whether or not it’s worthwhile trying to sell the business in the first place and enable you to substantiate the price you have in mind. Once you understand the price or value of your business, you may need to take tax advice to ensure that any potential deal is tax efficient. Remember, the books will be the books and whilst a Valuer can look at adjusted profit figures, don’t expect a buyer to pay for undisclosed business – if you can’t record it, you can’t pay for it!

You’re going to obtain a free of charge valuation from a broker?  Many brokers have a vested interest in providing you with a free valuation in the hope that you will sign up with them.  Valuations usually take a great deal of time and thought so be wary of quick guesses, followed by undue pressure to “sign up”.  Very often values have been greatly enhanced so you feel compelled to pay high up front fees as the business value has probably doubled your expectations and enthusiasm to sell.  Once you have paid the up front fees and nothing much as happened you may begin to realise that the business value was not worth the paper it was written on (assuming it was written out in the first place)!

You don’t know your numbers? Many business owners are interested in selling their businesses but struggle to know what the balance sheet is worth, let alone the turnover or profit figures. There is a balance between knowing basic information and giving the impression that you know almost everything that there is to know about the business, as you may end up being perceived to be the business. Don’t guess the figures and at the very least, make sure that you can get your hands on the information required and have summary sheets to hand. Another area which is good to know, is the likely level of business for the year ahead, three years, even better. Buyers are especially interested in the future business prospects and so it greatly helps to have a considered opinion, rather than second guess. False information will lead to uncertainty and reduce confidence in progressing the deal.

You haven’t identified your USP’s?  Like any other sale, there are two main points for sales people to consider: “features” and “benefits”. In general, buyers are not really interested in how long you’ve been in business or what great customer service you provide – you should be doing that anyway! Buyers are only interested in “what’s in it for them”. Before selling your business, you need to place yourself in the buyer’s shoes and identify all the things that would create value for them because if you don’t fully understand them, how can you expect the buyer to know, as they will not appear on any set of accounts.  Ideally, you need to write down all the things that make your business unique (ones which can be truly justified) and use them in the selling process to drive up the perceived value. Invariably, there will be weaknesses identified within your business but this is where a negative can be turned into a positive – the weakness could become a selling point as “an opportunity for future development”, where the buyer might be able to maximise future growth.

You are only going to deal with one buyer? In general, it is best to aim for 6 potential buyers as offers could be double that of others, simply because businesses have more perceived value for different reasons, to different buyers. Even if you do have just one buyer, there’s nothing wrong in letting on that there are other interested parties to create a competitive environment, otherwise it’s difficult to negotiate a higher price, if the buyer thinks they have total exclusivity, before talking to anyone else. When you do accept an offer and have to grant exclusivity for the due diligence exercise, ensure that this is limited (60 days is the norm), so if the buyer does try to re-negotiate the price down to an unacceptable level, you can get the business back on the market, rather be drawn into a long, drawn out battle. Remember, that deals can fall through for a variety of reasons (funding being one of them), so if you can have other potential buyers on hand, you will stand a better chance of finally selling. Even before you decide to sell, record all unsolicited approaches – they may become useful one day.

You are going to accept the first offer? If you are interested in securing the full or fair value for your business, it is always worthwhile declining the first offer, as people often want what they can’t have and if the buyer wants the business badly enough, they will soon be back with a revised, better offer. When advertising businesses for sale, it is always advisable not to give an asking price or a guide price and never disclose your bottom line price as this will be limiting offers to that level. Always best to invite “indicative offers”. Many business owners, do have unrealistic expectations about the price or value of their business, so again, put yourself in a buyer’s position and ask yourself, how much would you pay?

You don’t have any marketing material? Apart from having to be pro-active in marketing or advertising your business for sale, nothing puts a buyer off more than lack of information, once they have shown some interest. Ideally, the best initial document to provide is a Sale Memorandum or Information Memorandum (known as the IM), which will provide a good overview and background to the business, without giving away sensitive or highly confidential information.  Invariably, it will provide key financial figures and highlight many or all of the unique features about your business and list the opportunities for future business development. Make sure that you read and re-read the document to ensure that it is a factual and true description of your business, as false claims or statements will eventually be found out and undermine any potential deal. As business is done between people, the main objective is to provide just sufficient information in order to meet the buyer face to face. Prior to providing the IM document, a Confidentiality Agreement or Non-Disclosure Agreement (known as an NDA) should be put in place, as this will help ensure that everything can be kept as confidential as possible, without the risk of it being made public to your customers, suppliers and staff.

You’re expecting all the cash up front? Whilst there are deals where all the cash is paid up front, don’t assume that this will be the case with your business. Place yourself in the buyer’s shoes and start to realise that there may be an element of risk to be covered, finance to be considered, hand-over period to be agreed etc. A premium may be agreed if the business is funding the take-over, so best to keep an open mind on how the deal can be structured. Understand that there is a big difference between “deferred payments” and “earn-outs”. Deferred payments may have some form of security agreed, whereas earn-outs may be linked to the future profitability of the business, where you may have little or no control.

You’re going to pay extortionate up-front fees to a Broker?  OK some business brokers charge high (or very high) up-front fees in return for a high level of service, for high value businesses, that’s not disputed. But at least check out why you are going to pay thousands or even tens of thousands of pounds to a broker to have the privilege of selling your business. Just be wary about false promises and unrealistic values.  Some brokers may “feed off the business owner’s greed” so watch out! Ask for references.

You’re going to sell your business with a Broker on a “no win, no fee” basis?  Sounds a sensible agreement but why?  Check out the Terms and Conditions as they may be lots of small print to understand.  In particular, when you’ve decided that you’ve had enough and want to take the business off the market or use a different Broker, you might end up with some high cancellation fees – a few Brokers seem to be geared up for litigation, so beware! In the worst cases, you may be liable for fees, even if you changed the Shareholders or Directors without the broker selling! Google the broker’s name followed by “complaints” and see what you find…..!”

You’re impressed with the Broker who came to visit you?  Nothing quite wrong here but check out who is responsible for selling your business.  Some people may be there just to “sign you up” and so you’ll never see them again!  Find out exactly who is responsible for selling your business – “deal teams” often have changing staff. Which is all a bit of a problem when you want to see someone to discuss the progress (or lack of!)  being made with potential buyers. Watch out for slick reports and presentations too – they may impress but could be full of mistakes – if you bother to look closely!

You’re not going to use Professional Advisors? No one likes to spend money unless they have to but with the careful appointment of  professional advisors, they can actually save you a great deal of money. For instance, a Broker can help find you suitable buyers through their connections and lists of potential buyers and investors to place you in a competitive bidding situation; a specialist Corporate Lawyer will help protect you from unfair or onerous terms within the contract of sale; a Tax Accountant can help advise on the best ways to minimise your tax liabilities (before the sale completes) and a Corporate Financial Adviser can help make sure you are getting the right advice on when to sell and how to maximise shareholder value. Make sure that your advisors have the capability of meeting your requirements, can work to an agreed budget and work within your agreed timescale.

Always remember – Plan to sell your business – “If you fail to plan, you plan to fail!”

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Next step:  find out why you should consider Stirling to sell your business, by clicking here.