This month marked 11 and a half years of hosting the Henchards business lunch. No big deal in terms of landmark ‘anniversaries’ but nonetheless a notable event. The reason – yet another reinforcement of the power of association.
Henchards has never been a business with a ‘do it all ourselves’ approach to advising and helping our clients, rather we take the view that in the right circumstances others may add more than we can ourselves. Our role is primarily to navigate and support our clients to a successful business exit, and it's not uncommon to enlist the support of others in our business network.
One of the often-mentioned words in exit planning is ‘legacy’. If you have owned and built a business over many years understandably you may feel the desire to leave a mark after your tenure of that business has come to an end.
So how can a legacy be incorporated into your exit plan?
You put in place an exit plan because you want to sell your business – hopefully for an attractive price that sets you up for what you want to do next in life. At least, that’s one scenario. If that is your objective then a good exit plan will help you prepare the business for sale, identify ways to find buyers and ensure the business is in the best shape possible for a successful outcome.
However, what if you are not interested in selling but do want to step-back – is an exit plan still relevant?
Selling your business is no different to any other sale in that it has both objective and subjective aspects. To get the best outcome from your business exit you need to work on both.
A potential acquirer of your business will look both at the facts and the story you tell. Different acquirers will place different emphasis on each. Business sales and valuations are assessed by various factors such as assets, financial record, risks and potential. The first two are pretty clear – they are what they are (or should be although different methodologies may result in different valuations). The second two, risks and potential, are more open to influence by ‘the story’ you tell. This story telling has a bearing on an acquirer’s perception of how ‘attractive’ your business is and how easy might be the purchase and integration.
How often have you received an approach from a company proclaiming they can sell your business?
Perhaps it offered you a place at a seminar or a ‘free consultation’ with an expert in valuing your company.
Where did the letter or email go? Was it set aside because one day it may be useful, or put straight into the bin?
The business of selling businesses is, well, big business. The key point to recognise is the difference between being ready to sell and being ready to plan your exit. There is a big difference in timing and the steps you need to take.
As a business owner you face multiple decisions every day – some routine, some forced upon you and some because you want to change or improve an aspect of your business. Sometimes alone, sometimes with your team and sometimes with external advice you make many decisions to improve your business performance so that at some point you can reap the benefits when you exit.
What does it take to take on the ownership of the business you work in? Is prior experience essential? If you’ve not owned a business before, can you ‘learn on the job’?
If you are fortunate enough to have an opportunity to become the owner or part-owner of the business you work in, should you take it? What might the current owner consider in formulating their decision to sell to the management team?
From the germ of an idea into a twenty-year journey; in February 2003 Henchards was established. What did we plan, how did it turn out and what’s next?
Henchards’ Director, Ian Parker, tells the story, “I don’t come from a family of entrepreneurs, nor did I harbour grand plans of business ownership when I was a lot younger. I lacked a ‘guiding’ hand when it came to work and business. As a consequence, I had always made ‘what next?’ decisions as each opportunity or obstacle presented itself. Whether through luck, judgement or otherwise I started the business having just left Orange, where for four years I led the multi award-winning customer service team, with an itch to do something differently.
One of the first questions we ask business owners is, ‘Do you have a business plan?’ Most people think of a business plan as a document that’s written for an external audience, usually investors or a bank manager, with the aim of attracting investment or a business loan.
But it’s just as important to have a business plan for your own use, guidance and accountability. An internal plan provides focus and helps business owners to make better decisions. And, when shared with the wider internal team, it helps engage employees and give them an idea of where the business is heading.
In almost all exit scenarios the capability of your management team will play a part in how well you achieve your objectives. Apart from a situation where you are forced, or decide, to close the business an ownership transfer, in whole or part, will be influenced by the team you have built.
An article in The Economist* this week bemoans the lack of business management capability in Britain and highlights this shortfall as a material inhibitor of growth for the country.
We have talked to other business owners and they are taken aback that we forecast our revenues, costs and cash flow
We’ve written a number of guides on selected business subjects that will set you and your business in good stead for whatever future you may choose.
These are free for you to download and to make use of in your business, so please help yourself.