This week we’ve got a guest blog from Andrew Durbin of Andrew Durbin Consulting Ltd, who was until recently Corporate Finance Partner at Smith Cooper.
Andrew’s thing is helping SME company owners plan for their exit, prepare their business for sale, and getting the best price for all those years of hard work and sacrifice. So I thought it was an ideal subject to get you thinking about exactly where you’re heading.
So, over to Andrew
I heard a comment recently that most business owners spend more time planning their holidays than planning where their business is heading. I don’t know whether this entirely fair but I’m sure there’s at least an element of truth in it!
Many of us end up as business owners for different reasons; being made redundant, coming up with an innovative product or service, spotting a way to do an something better, a desire to be our own boss and have more control in our lives, earn more, create capital value for the future, or just wanting a better life.
But whatever the original reason, very few of us start out with a clear goal and business plan, and even less have a good idea of how we’ll eventually exit. And as time goes on the business grows and becomes more complex. It gets harder to take a step back and see where we’re heading.
It’s a major area that doesn’t receive enough thought in my opinion. What’s going happen to the business when you want to finally retire or realise the value from your business, and cash in your “pension”.
So how do you go about selling your business ?
Many business owners assume that when they have had enough they’ll simply put the business on the market in a similar way to selling a house.
But if you want to sell your business one day then there’s a lot to think about (unless you get very lucky) and you really need 3-5 years of planning to get your business ready, if you want the best deal.
And there’s actually a lot that you can do to make your business more saleable (or saleable at all in some cases) and to get the best price.
Here are 10 of the top things to think about:
1) Can your business run without you – have you got procedures and processes that mean your team know what to do if you’re not there?
2) Will your customers stay when you go? And who brings in new customers – is that you?
3) Do your financials stack up? Do you know what your balance sheet and profitability need to look like to get the price you’re hoping for?
4) Have you got good financial and management information that will tell a prospective buyer all they need to know?
5) Is your management team capable and credible, and can they run your business without you (or are you a control freak)
6) Would any of your current management team like to buy the business?
7) Are your sales contracts worth the paper they are written on?
8) Are there barriers to entry or would it be more cost effective for a competitor to poach a few of your key staff?
9) Is your industry / sector growing or declining?
10) Are there trade buyers or venture capitalists buying businesses of your type?
If you spend time shoring up these key areas it will give you the best result possible when that time comes. And if your exit is in the next 3-5 years you could consider getting some professional input along the way.
I realise that some important questions have been asked here, I make no apology for this and hope you have chance over the weekend and the coming weeks to think about the questions and start to consider some answers. I believe that creating time to think about what you want from your business and how the business can be shaped to allow this is hugely valuable and much under rated.
I do hope you find this blog useful to you and your business.
Andrew Durbin
Director
Durbin Consulting Limited
Drop Andrew an mail (link sends e-mail)
(m) 07880 705550