1st November 2017
While I was away in the USA, we held a Masterclass on Succession Planning in Sheffield and as it was delivered by two of our most successful Entrepreneurs in Residence (“EIRs”). I thought it would be useful to blog about the most important points discussed. My thanks to my colleague Martin Slathia without whose comprehensive notes I would not be able to do this blog. The EIRs were Graham Royle of GRI Group and Richard Doyle the founder of Esteem Systems – all the “oyles” together!
Graham Royle emphasised the importance of investing for the long term. Richard Doyle said if you are not planning to hand the business on, you should be ready to sell at all times. So get rid of what are likely to be issues for a purchaser such as family members employed in the business or your own “toys” owned by the business.
A purchaser should always value a business on its financial and trading history not hockey stick forecasts.
Selling a business
You need business support, advice and help if you have never done it before. Third parties can give you an understanding of the value of your business; get lawyers and accountants you can trust and who are pragmatic.
With an MBO make sure the managers are still doing their day jobs. A sale can be incredibly time consuming and if the managers, including the owner if he/she is involved day to day, are distracted, the value of the business will go down. And if the profits decline in the last few weeks of the sale process, it will make the purchaser worry that the business is not as big/good as they thought it was and the deal may go off. It is important that the deal is equitable to all concerned.
Your advisors might want to complete the deal to get their fees more than your ongoing business so do not be pressured by them. You should be willing and able to walk away – even after signing non-binding heads of agreement.
Don’t tell anyone that a deal is on the table until it is done.
Selling is the most common route of ”succession planning”. Ask one of our EIRs to help you.