Exiting your business the right way
This article is from a previous Equinox magazine, which you can view in full here.
There is rarely a more emotional and stressful time for a business owner than when they come to sell. Here, Terry Hayward of The Alternative Board shares his own experiences.
We’ve all heard the expression about life’s certainties and most would agree that tax and death fit well into this category. Well, if you’re a business owner, there is one other certainty: at some point you will exit your business and that exit can either be planned or unplanned.
Unplanned exits are messy affairs. By their very nature they are unexpected. They do however have the advantage of not having to go through the upheaval and stress of the planning needed for an orderly exit.
For me (and I’ve been through the process twice already) the starting point is a “personal vision”. What is it I’m trying to achieve for myself? For some people a business is simply a means to an end – if you want to be rich and retired and you have a buyer who can provide those things then the decision might be quite simple. But the reality is that we may have spent many years building the business and we have now developed an emotional attachment to the business itself, the employees and even the customers.
When I sold my first business (and I was one of five shareholders) the issue was simply about financial security for my family. I hadn’t started the business (it had been going for seven years when I joined) but I saw an opportunity that with three to five years of hard work
I, along with my fellow directors and shareholders, could build something with enough value to achieve the aim of financial security. We put the plan in place and achieved it.
However, as the sale got nearer I began to have doubts. Had we valued the business at the best possible price? What was going to happen
to the staff? Would any other job or business give me the enjoyment and the challenge that had driven me and been such a big part of my life? Doubt had arrived!
So, part of the process of exiting your business must be planning for how you will cope with it. It’s not about deciding not to bother after all, it’s about preparing for the inevitable:
Learn from others
Whether you have a trusted adviser, a coach, a mentor, a non-executive director or a friend you can rely on, discuss your plans and get their input. It helps if that person has already been through the process since nothing beats real-world experience.
Be clear what, if any, role you are going to have in the business after the transaction. It will no longer be your train set (unless there is an earn-out period), so can you cope with somebody else making the decisions? If you can’t, be honest.
Don’t change everything
A change of job is one of life’s most stressful occasions. Give yourself time to enjoy the break, reflect on what you’ve achieved and plan for the next stage in your life.
Filling your time
Most business owners I come across work significantly longer hours than average, so how will you fill this time? Only a couple of weeks ago a friend told me he’d had enough and wanted out. But his thought process was tainted by the fact that for the last four weeks he’s been golfing, cycling and walking in the sunshine everyday – what happens in the winter? Just like not going shopping when you’re hungry, don’t make such a monumental decision when the sun is shining!
Out of the frying pan and into the fire
The decision to sell your business should be one that has been planned over a period of time in a strategic way. When times are tough it’s easy to think “I’ve had enough, I want out”. But fire sales rarely achieve true value and almost always end in regret.
For a business owner, selling your business is possibly one of the biggest decisions you’ll ever make, so give yourself the time to get it right. You might not get a second chance.
Visit The Alternative Board’s website here.
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