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Will your business be ‘Fit for Sale’ when the time comes for you to sell it? (October 2011)
Will your business be ‘Fit for Sale’ when the time comes for you to sell it? (October 2011)
We have always given advice to business owners that they need to formulate a strategy for their ultimate exit from their business and spend time preparing or grooming the business for sale. Such planning and preparation usually takes anything from two to five years and can make a very significant difference to the attractiveness and appeal of the business to the market and the price that is achieved. All too often businesses are offered for sale without being ‘prepared’ for market and this, not surprisingly, results in them being undersold and/or problems arising during the sale process which sometimes lead to such as reductions being demanded in the previously agreed purchase price and even collapsed sales! For these reasons, if such potential pitfalls are to be avoided and the best possible price is achieved, it is sensible to ensure that a business is ‘fit for sale’ when it is offered to the market - for more information go to our home page and click on ‘Is your business fit for sale?’
Meanwhile, the article below which appeared in The Daily Telegraph on 18th October clearly demonstrates the fact that far too many people are failing to plan their exit routes and, as a result of this, are paying the price!
Roger Mundy, Beardsley Theobalds
Directors ‘fail to plan’ for retirement
Entrepreneurs are increasingly turning to exit options of "last resort" such as management buyouts (MBOs) due to a lack of willing trading buyers, research has found.
The number of business owners prepared to consider an MBO has tripled over the past three years, although it remains an unpopular option. Just one in five entrepreneurs surveyed by the private bank said they would consider selling to their management team.
Andrew Haigh, managing partner at Coutts Entrepreneurs, said: "There’s a high percentage of MBO sceptics, but by ruling out a sale to their management team, they are closing down a potentially attractive exit route, which accounts for 20pc of business sales".
Common reservations included concerns about the ability to maximise the price for the business and perceived risks owners attached to entering into discussions with people they had worked with previously.
Entrepreneurs are also dissolving saleable businesses because of a failure to plan for their departure, accountants have warned.
There are more than 80,000 companies with at least one director aged over 60 and with revenues of less than £10m that have changed from being trading to dormant or dissolved over the past 12 months, research by the Corporate Finance Network, a group of advisers drawn from accountancy firms, found.
However, the companies hadn’t been part of a liquidation or insolvency arrangement and weren’t involved in any significant acquisitions.
The data exclude very small deals – it only records sales worth more than £500,000 – and the directors may have stopped trading for reasons other than retirement. However, Kirsty McGregor, chairwoman at the Corporate Finance Network, estimated that as many as 80pc of the directors could have simply retired. She said a failure to plan for succession and make the business attractive to buyers was usually to blame rather than an intrinsic lack of value in the business.
Ms. McGregor said: "Most small business owners don’t want to face the fact that one day they may have to leave their business."
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