Ever thought of selling your business? Perhaps you’d like to spend more time on the golf course or, more likely, you wonder if that might open up growth opportunities for your company.
Then I’d recommend reading a series of articles in a recent newsletter from the Academy for Chief Executives about how to go about the process, or first to ask if it’s really the right step to take.
The advice comes from an outfit who trademark is ‘Meet the board you could never afford’.
Timing, says chief executive of the academy Andrew Marshall, is crucial. He advises following John Paul Getty’s answer to how he became a billionaire: ‘by selling to early’. That means accepting a reasonable price rather than waiting for ideal market conditions or the right time in the economic cycle.
But why are you selling? Are you running out of steam as an owner-manager? He suggests a joint venture or outside investment or a leadership reshuffle might be alternatives.
Whatever, he, says, the story behind your exit should be compelling and positive. Does the company need new skills to exploit growth opportunities overseas, for example?
A sale can take time, with due diligence to perform. That’s where that little word, debt, comes in. Are your unpaid invoices pilling up on the desk? Or hidden away, out for sight?
That’s not going to provide the transparency you need in a sale. Marshall says: Be completely transparent in any disclosures and trading forecasts, even if they mean a reduction in the offer. Remember, failure to disclose something material to the valuation of the business can come back to haunt you, even after a deal has gone through.’
But what’s your business worth? That’s a question tackled by Jo Haigh, CEO and founder of FDS Corporate Finance, who has bought and sold 400 companies in 25 years, according to her biog. Value, she notes, is like beauty: it can be seen differently by different people.
Fairies at the bottom of the garden
So let the horse trading begin: auction or open market? The former might suit someone with more experience of selling companies than the average owner-director.
Haigh talks about the technical ways of valuing a business: profit multiples, net a ssets plus goodwill, or multiples of income as in insurance. But one of the most active markets is for tech businesses. Here, she says, it can become ‘a little more complicated’ if the business is in an early stage, generates revenues from selling licences or intellectual property. ‘In these cases you can project forward an anticipated income stream and profits, but as someone once said to me, this is a bit like fairies at the bottom of the garden: we would love to believe it, but until we see them…’
Now, it’s only fair to encourage you read these articles and more at the academy’s blog or by signing up to its newsletter. And the last point I’ll pick up on: is it worth having your business valued even if you’re not thinking of selling it? Haigh’s answer is ‘almost always yes’, so that you will know the value of what you’ve created and might possibly be spurred on to consider a sale.
And that is also when a call to SJCollections to help knock your unpaid accounts into shape might just be a good investment of your time.