Sell It ‒ How To Sell Your Business More Easily And On Better Terms
- Jun 25, 2022
- 5 min read
Updated: Feb 14, 2024
Written by: Christine Nicholson, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
When I started writing this article, I kept in mind an old colleague from +20+ years ago who set me off on my mission to improve business exits. To protect the privacy of his family, let’s call him Trevor (he is a real person).
Trevor had left school at 17 and struggled through a couple of jobs before realizing that he could set up on his own. He started building a product in his garage when he was 24.
By the time he was 35, his business had moved into new premises and Trevor was employing 20 people. He’d also brought in a business partner to get the business growing and take the pressure off himself as being the only decision-maker.
Life was pretty good, he was married with 3 children, a bigger house, and more outgoings. Roll forward another decade and Trevor met the love of his life and decided to make a massive life change. He left his wife and started divorce proceedings. He bought a new house, solely in his own name. He started preparing to marry his new lady. It all looked like a bright new future in a new life. And he started to think about how he could spend less time at work in the business.
Trevor did not have a will. Or a shareholder agreement with his business partner. In fact, they’d been so busy building the business that they hadn’t really thought about how they would protect the value they were building. They were both heads down, getting on with keeping the wheels turning of what was now a £10m turnover enterprise.
Trevor was still a big part of the business and managed ALL the customer relationships. His business partner was the back-office guy and kept the wheels of the operation in motion. He was also a minority shareholder and had limited voting rights but that was ok because of the verbal agreement that he had with Trevor about the future of the business.
While Trevor was making the new house ready for his new wife, and he was still legally married to his first wife, he fell off a ladder. This triggered a devastating chain of events. Sadly, Trevor died.
With no will, his estate was transferred to his not-quite-ex-wife, including the house he bought with the intention of living with his new lady. His embittered wife decided she wanted to become involved in the business despite knowing nothing about it. The shareholding transferred to her and gave her voting rights and the right to appoint directors.
With no clear instruction, this allowed her to start spending company funds on all sorts of activities that didn’t add value to the business. She decided to take over sales and marketing. She crushed the spirit of the team and they started to leave. It was a disaster. Within 2 years the business was closed, and most of the value was lost as well as nearly 100 jobs.
You might think that’s a sad story and it won’t happen to me. Sadly, more than half of all business owners leave their business before they are ready in a response to either an unexpected offer or an unplanned event such as death, disability, disease, or divorce. In these circumstances, the value of your business will be affected unless it is fully prepared. Business owners are forced to respond to these events on the back foot.
And if you are reacting, you aren’t leading.
You will get less from your business than it is otherwise worth. Even if you are selling your business proactively, most business owner only goes through the process once and often have no idea what to expect. The process of selling a business is often shrouded in mystery. And it should not be.
The dream of building something bigger than a job drives many of us to take more risks and create a business that has long-lasting value. Any sacrifices are justified by the potential rewards if the business is eventually sold. But there is another horrifying statistic that many business owners turn a blind eye to:
80% of businesses that are attempting to sell do not get sold.
Preparation for the successful sale of a business starts the year in advance. Understanding the process and what the buyer is looking for and how it affects the value of the business means the seller can get on the front foot and be ready for the sale.
Preparing for the journey to sell a business means you’ll get more from all the hard work you’ve put into your business. Being ready for a transaction has the added benefit of having a business that is easier to run, more enjoyable to own, and less stressful for everyone, including yourself.
Your business will also be worth more!
Let’s face it starting and building a business is hard. It’s risky. It takes a special kind of spirit to take the leap from a salaried corporate job into the challenging world of entrepreneurship. The first few years are usually about working as many hours as you can, chasing the essential customers, and getting positive cash flows.
Strategic planning takes a back seat.
If 80% of all businesses do not find a buyer, then a lot of business owners are currently investing a lot of time, effort, and their own money in an asset that has potentially no long-term value at all. If you knew your business was going to close its doors when you retire with little or no capital value, would you be making the same decisions today?
How much is your business worth today?
How do you know? And what can you do to change it?
And if knowing your business value is a key part of being prepared, then why are only 2% of business owners aware of what their real business value is right now?
Learning what pre-sale preparation is required ensures that you get the best value for your lifetime of work. When you understand the critical path that business owners follow when successfully selling their businesses, you can start to get ready. Knowing what every step of the sale process is will mean there are no surprises and you’ll be equipped with more knowledge and understanding. And the result of this knowledge? A more enjoyable experience for you, your business, and all the stakeholders.
That said it is not easy, it is still hard work
Having built my own companies and come to the rescue of businesses that are on their knees, I know what it takes to get from unsaleable to exit success AND how businesses get exit ready in the first place. NOW is always a good time to think about “what next?” and “what if?” No one knows what’s going to happen tomorrow but being prepared for the most common likelihoods means the assets you’ve been building over your lifetime are protected, and your family has been looked after. It just takes a bit of planning and preparation.
The good news is you can start with some simple quick wins today that cost nothing apart from a little time and thinking.
Christine Nicholson, Executive Contributor Brainz Magazine
I am Christine Nicholson, an author, speaker, and award-winning Professional Business Mentor who works with multi-million turnover business owners of technology, engineering, or product/services businesses.
I'm UK Business Mentor of the Year 2021 and a Global Top 50 Woman in Accounting. I've appeared on BBC talking about business!
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