Should I stay or should I go?

The forthcoming Christmas break is, for many business people, the one time of year they can enjoy a proper break, away from the constant interruptions of emails and deadlines, and spend some quality time with friends and family, reflecting on the year just passed and the challenges that lie ahead.

This period of reflection is often the catalyst for change and we frequently find ourselves spending much of January meeting prospective clients who have expressed a desire to sell their business.

There are a number of valid reasons why someone may come to this decision including:

  • I have taken the business as far as I can.
  • My attitude to risk has changed.
  • The economy/competition/technology is a threat to me.
  • My team doesn’t have the ability to develop the business.
  • I want to capitalise on entrepreneur’s relief while it is still available.
  • Multiples are strong in my sector and I want to get out at or near the top of the market.
  • I had an approach it has got me thinking.
  • I can’t work with my co-shareholders anymore and we need to go our separate ways.
  • Personal reasons such as a health scare or simply a desire to spend more time with family.

A key part of our process is to look beyond the headline reason for the decision and understand the underlying motivation.

We have bad days, or weeks, when work isn’t going well, the pressure is building and it just isn’t enjoyable.

However, for most business owners the decision to sell is a once or twice in a lifetime moment, so it is crucially important that proper consideration is given to the following thoughts:

  • Why now? What has changed in the business or personal circumstances?
  • What position is the business in? Does it need investment, new people, new systems, etc.?
  • What are the alternatives? Can something be changed that would take the pressure off and make work enjoyable again?
  • What could someone else do with the business? Are you selling an opportunity or a risk?
  • What will you do next? Even if the sale of a business yields a life changing amount of money, many sellers soon find themselves bored and seeking a new challenge.

It may sound counter-intuitive coming from a firm that ultimately gets paid when people sell their business, but we would much rather potential clients wait and sell for the right reasons, at the right time, rather than rush into a process which can be time-consuming, emotionally draining and indeed costly.

There is a high correlation between poor planning and aborted transactions; a failed process can linger over a business for years, putting doubt in the minds of employees, investors and potential acquirers.

Once the underlying reasons for wanting to sell are understood, only then should you look at the options, which may include:

  • A trade sale i.e. to another company.
  • A partial exit, achieved through selling a stake in the business to an investor, which would be a private equity fund, HNWI, family office, etc.
  • MBO, MBI or BIMBO.
  • Putting in place an exit readiness plan for a sale in the medium-term.

We will address these options in the weeks ahead, but in the meantime, here’s a link to our first blog in this series, ‘Why is succession planning crucial for your business?‘ .