Selling your business: get the exit you deserve

Author
Jim Shaw
Partner | Shaw & Co LLP
16th November 2018
Member roleChamber member

Shaw & Co are an advisory team established to help owner-managers maximise and realise the value within their business. They've worked with Pukka Herbs, Voucher Cloud, Gradwell, and Trunki among others, and know that the process of exit planning and building a strategy is essential to achieving the desired result.

For owner managers there’s never enough time in the day, so thinking about your eventual business exit can easily get pushed back… and back.

But while day to day business events are always pressing, your exit will be the biggest transaction of your business life, and also one of the most significant for you and your family. So it’s important to give it serious thought sooner rather than later.

Plan it right, get everything in place and you will, like the owner managers we’ve worked with recently, be able to exit when you want and at the right price. Leave it too late and you may find that when the time comes to sell, it’s the buyer who’s dictating the terms.

Just as ‘overnight’ success stories are often the result of lots of unseen hard work, headline-grabbing business sales have usually been meticulously planned for years.

Setting your goal

At Shaw & Co we work with owner managers, not corporates. If a multinational wants help selling off a subsidiary, we aren’t going to get involved. We like working with the individuals who have built and led the company. I know what that’s like from my own personal experience, and we like dealing with people as well as finance. As part of that philosophy we think it’s vital that the ultimate exit goal is set by you, for you.

So the first question we ask when beginning to plan an exit is a personal one, ‘What is your motivation for being in business?’. For most, that answer is to pay the bills, look after their family and provide the sort of lifestyle they want. Therefore our very first stage of exit planning is to get the owner manager working with a financial planner to set a target figure. By that I mean what capital sum you would need to do everything you want in life, post exit – from bills to bucket lists?

Of course, we aim to maximise your sale price, not just reach a set figure, but you would be surprised how powerful that number is and what it represents: a clear goal for your business and total financial freedom for you and your family. Something worth working for!

The next step is to plan towards that number, at whatever date in the future you target as your exit point.

It’s not just about the money

First, a word on other motivations.

Sebastian Pole and Tim Westwell founded organic herbal tea and supplement company Pukka Herbs and grew the company to turn over £26m. They knew a multinational buyer could give their brand the truly global future they wanted, and would pay a hefty price to do so, but they were clear that the new owner had to maintain their commitment to organic products and fair trade. The deal we helped broker with Unilever guaranteed that.

Other owner managers have similar concerns that may stop them from getting started on exit planning. They want to retain or reward certain staff, maintain business principles or provide support to a local community. It’s all doable and fixable, but only if it is part of a clear plan. Leave it to chance and those sorts of concerns are only going to increase.

It’s your goal, but you won’t get there on your own

What can you do between now and the proposed exit date to maximise value?

The first step is to share your plan with your senior management team so that they can help you drive towards it. That means aligning objectives and incentivising them so they have skin in the game. Exactly how you incentivise your management team is worth careful consideration, I looked at one of the pitfalls in a recent blog post.

Having got everyone on board, it’s time for the detailed business planning and financial modelling to identify exactly how you get from where you are now to your ultimate goal: an exit at the right time and at the right price.

You probably already know your buyer

Having spent most of your business life designing the products and services that your customers want, it’s time to start thinking of your business that way. What are its key features and benefits? What will the buyer value most?

Never forget, buyers are taking a risk. Organic growth is often a safer and more reliable option, while buying is a step into the unknown. So the more value they see and the more comfortable they feel, the more likely they are to make a deal.

That’s why it’s likely you already know your eventual buyer and they are aware of you. Because buying a business they know little about will often be considered too risky.

But you’ll still need to make an effort. Growing your business will add value, while getting every detail of your accounts in order will provide greater comfort. And raising your profile through industry awards and PR will help reinforce the message that you are worth the investment. There’s also the chance that it will attract more competition, which is always good.

Unlike some corporate finance teams, we don’t hawk your business around long, computer generated lists of potential buyers, we’ll work with you so that you already know your potential buyer or buyers and plan accordingly.

Getting the ball rolling

In summary, set your goals, align your team, understand your buyer and apply the strategic levers to maximise value.

Of course, there are nuances depending on whether a trade or private equity sale is on the cards, and a great deal of work still to be done before the deal completes, but the crucial thing to do is start thinking about your exit now – the rest will follow.

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