Thnking about selling your business? Here’s the things you need to consider

Dave Rebbettes, founding director of BCMS, shares his advice for SMEs who are ready to sell and exit their business

Day in, day out you commit yourself to your business, and have passionately led your company from your lounge to your spacious offices.

Sometimes though, it feels that this amazing achievement consumes your whole life and meanwhile, there has always been that lingering dream of working remotely while island hopping in the Caribbean on your lovingly restored yacht.

Building your business has been a rewarding stage of your life, but lately, perhaps the idea of selling it has been on your mind.  Although this is probably the most difficult decision of your working life, the warm seas are calling.

Moving on

Having worked with many business owners, I have found that the main reason that many business owners decide that it is time to move on from their businesses is due to exhaustion – although another key reason is that they no longer feel sufficiently challenged.

Of course, COVID-19 and the resulting economic turbulence have been a major mental shake to many businesses and revenues may be under pressure. A savvy business owner may realise that fresh eyes could revive the operations. Business owners may decide to move on as they are simply looking for a change of pace – either by seeking out a new challenge, shifting focus to family life, or even retiring.

Whatever your reasons are for making an exit, you are not alone. In fact, many business owners dream about their exit but have no idea where to start. This might lead them to sell to a known buyer, such as their management team or family, or even to their most hated competitor. Though this is often faster and ensures one’s legacy, it will usually not achieve the best price.

So where do you start with a sale?

Tip 1: Put your team in place

If you have considered selling your business, you should have professional help to navigate the process. An advisor? Fees? It is easy to think that you cannot justify the expense of an advisor.

Remember, any buyer will have their trusted supporting team to assess your business and to negotiate the best outcome for them. You really need your own dedicated team coaching you,finding those good buyers, helping you to negotiate the best outcome, and to manage any possible complications. Advisor fees, in fact, should come from the improved value that you take out of your sale. This is a once-off
transaction, and you cannot afford costly mistakes!

It is key to choose an advisor who really listens to you and your objectives for the sale. The right advisor will understand your business, analyse your company from a buyer’s perspective, and will highlight the key opportunities for buyers. A good advisor will really research possible buyers and speak to them directly about the benefits of the acquisition, not only try to manage the sale via email. You may be in a hurry to sell, but do not be too hasty and let your advisor lead you through the process of finding the best-suited buyer for your business.

Tip 2: Market your business

Selling a business involves finances but it is not about finances.  Rather it is a sales and marketing process. It is about packaging your business as you would a new product being launched and marketing it to prospective buyers. But do not forget that selling a business is also a personal transaction where cultural fit is critical – people buy people, and you are a critical component of the sales process and reflect the business.

Tip 3: Sell the future and not the past

When establishing the value of your company, a buyer will look at the potential in your business rather than at past performance.  They will look to grow and improve the business faster under their ownership, otherwise, this acquisition will probably not work for them. They may look at what you were able to achieve in the company for curiosity’s sake, but the bottom line is that buyers want a return on investment and need to see potential in your business.

Important to note is that a buyer will only look at the potential of your business if there are other competitive buyers in the pool driving them to really open their eyes to the possibilities.

Tip 4: Look far and wide for competitive buyers

When assessing potential buyers, most sellers immediately look to their competition. In fact, the best buyers are not competitors, who have no incentive to pay a premium price for your business. Rather, an ideal buyer is one that is looking to buy a complementary product offering and even your customer database. The best buyers are often the ones that you would least expect or that are not even looking to buy.
But finding such buyers requires considerable effort and may include looking abroad for companies that might be trying to establish themselves i n the UK, and that would be prepared to pay a premium to do so.

This raises another important point. You should always identify multiple potential buyers to create a competitive environment as this is key to driving the speed of the sale, the sales price, and the terms of the sale. If there is no competition, the perceived demand will be low and so
too the value of your company – but competition forces buyers to look at the opportunities that could be derived from an acquisition. A UK company might even be more interested in your company to keep foreign buyers from entering the market – some healthy competition!

Your departure

Even if you are not wanting to sell right now, get your business sale ready as buyers do not want to see skeletons in your closet.  A good M&A advisor will guide you in your preparations and be quick to assist you when the time comes.

No matter whether it is retirement or the excitement of a new adventure that is enticing you to move on from your business, remember that you are looking for the most cash at closing and to secure your company and its employees.

The buyer in turn is looking to grow the business and at the same time for a great return on investment.

A good advisor will help to deliver for both of you. Being confident and careful, with the right support you will make the right sale at
the right time. Just in time for your next adventure to begin!

About the author

Dave is a founding director of BCMS, an expert in the company sale process, and an acknowledged thought leader within the M&A industry. In demand as a public speaker, Dave is also the primary presenter at BCMS masterclasses worldwide. 

Dave is well known as an international speaker, and lectures at over 100 business conference, seminars and events around the world each year. Prior to forming BCMS Corporate, Dave, along with Brian and Steve Rebbettes, was a director of Contract Leads Ltd, which was founded in 1969; a company that was later sold to Thomson Corporation (a precursor to Thomson Reuters) in 1988. 

Dave is also a Fellow of the Royal Society of Arts, an organisation well respected for its commitment to furthering the arts, charity and commerce. 

Dave has been instrumental in BCMS’ growth in over 20 countries around the world. Speaking to many thousands of business owners, in cities all over the globe, Dave has helped transform the received wisdom on valuing and selling companies.