You may still love your role as the leader of your business. Or, as is common after years of ownership and responsibility, your business may no longer imbue you with the energy and the drive that it used to imbue you with. You may even no longer enjoy what you do. If that is the case, is it now time to exit the stage and pass the ownership and responsibility onto another person’s shoulders? If not now, when?
In this article, we look at the four key factors determining whether a business owner is ready personally and professionally to sell their company plus a potential extra motivation for selling caused by a situation which took the world by great surprise in 2020:
● your company’s recent financial performance
● are you the best person to run the company anymore?
● is there something else you want to do?
● has your business already attracted interest?
● the impact of COVID-19
YOUR COMPANY’S RECENT FINANCIAL PERFORMANCE
If your company has been doing well in recent years, you can expect to sell your business to an acquirer at a premium.
The major fear and pre-occupation in most acquirers’ minds is that they and their management team will have to spend a lot of their time (which they are already short of) and effort creating momentum within the newest member of their wider corporate group.
In an ideal world, they want to take over your company, let the current staff run it with minimal supervision prior to any transformation project they intend to carry out, and to make enough money every month from their purchase to repay the funding they took out to acquire it with profit on top.
But not all acquirers are the same. If your business is struggling for internal operational reasons, a depressed wider marketplace, or both, there are a class of acquirers who specialise in taking companies whose performance is not optimal. They are experts in turning these companies around so that they achieve optimal revenue, profitability, and performance.
Please bear in mind that, if your company is not performing as well as it could, your acquirer will want to purchase it for what they perceive is its current value and not the value they believe they can add to it.
ARE YOU REALLY THE BEST PERSON TO TAKE THIS FORWARD STILL?
Is your passion still there to run your business? If it is, do you have the skills needed to take it to the next stage of growth? Do you want to expand the company or do you have no desire to create more responsibilities for yourself?
There are some people in business with an amazing talent to start a business and to grow it to a certain level. They can personally and professionally manage having 20, 50, or 100 employees working for them however they feel within themselves that they could not cope with having 200, 500, or 1,000 employees.
There are other people in business with no particular talent for setting up and establishing a business but they have a particular ability to scale a business to a much greater degree than others and to cope with the pressures brought about by that growth.
Many times, acquirers are the second type of entrepreneur and sellers are the first type of entrepreneur.
Are you curious to see what would happen if your business was taken over by someone who scales businesses for a living to see just the ultimate expression and expansion of your original vision under a new owner? And, of course, would you like to receive a substantial settlement for being the person who took it from nothing to a takeover target in the first place?
Acquirers prefer to buy businesses where the owners have less involvement in the day to day running of a business. That’s because there’s less work and risk involved when a company is already run by an experienced, tight, competent, and professional management team.
Think about your place in the business and what you can offer it in the next 10 years. Then try to decide if what you can offer is enough for you personally and professionally or whether you’d prefer to take a different path altogether.
DO YOU YEARN FOR ANOTHER CAREER OR TO DO NOTHING AT ALL?
Is there something else you’d rather be doing instead? Or would you like to retire or semi-retire or do little or next to nothing with the next phase of your life?
The timing of when you take your company to market is significant and the right decision means a deal with a much higher sale price and on better terms than the wrong decision.
The question to ask yourself is how much do you need to fund the next stage of your life?
If you sold the business now, would it provide the liquidity that you need or do you need to work on the business for another two years increasing revenue and decreasing costs to achieve the actual amount of money you need on a sale?
The best person to speak with is on this is an M&A advisor with experience in valuing companies and in helping entrepreneurs move from where they are now to the next stage in their lives.
HAVE YOU ALREADY HAD INFORMAL APPROACHES?
Have you received an informal but serious approach from a prospective buyer? You may or may not have had any intention of selling prior to receiving the offer but receiving it has made you consider your personal and professional life and whether you’re really where you want to be.
Rather than a sale opportunity, could this actually be a merger opportunity? There is obviously much to your current business that the potential acquirer admires, so much so that they want to own it. If you see as much promise in your potential acquirer as they see in yours, would joining forces be better?
COVID-19 AND THE EFFECT ON YOUR BUSINESS
The COVID-19 crisis in 2020 had a profound effect on the economies of countries around the world and on individual businesses and business sectors as a whole.
For many business owners, the idea of working for up to another 5 years to build their business up to where it was pre-COVID is not a pleasant idea.
Many will feel that they would rather do something else with the next five or more years of their life. They may consider receiving a final payment from their current business by selling it off as a better option.
SPEAK TO IBA CORPORATE AVOUT YOUR EXIT OPTIONS
Do you know the answers to these questions?
So much of your personal and professional life has been tied up with your company – from setting it up to establishing it to growing it to managing it in good times and bad. Many potential sellers worry more about a loss of purpose and identity than the size of the pay-out they may achieve on the sale of their company.
The most productive way of finding out what it is you actually want is to talk about it to an M&A advisor who has been on the same journey with many different clients over decades.
Their knowledge and their experience will illuminate the potential answers to the questions you have as you discover how those who have been in the same position as you have fared and thrived.
To speak with a member of IBA Corporate’s team, please call us, email us, or fill out the contact form on our website.