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Most business owners think they are in a position to sell their business at any time. This is a myth. More than 50% of businesses sold on the biggest websites in the UK don’t sell. Many are listed for years with no interest from anyone.
Many businesses have very little sellable value because the business can’t work without them. At best, they have a job, not a business. Many people call this a lifestyle business.
To add to this, every day in the UK, 1,000’s of business owners are reaching the age of 70. For most, this is the upper age for retirement. This is called the Baby boomer generation – The UK’s largest asset rich population group. And with so many owners wishing to retire – the result is the market is flooded with businesses for sale. It’s a buyer’s market. and prices are lower than most expect.
Many entrepreneurs start to think their employees are the best people to buy their business but here are the challenges that stop this happening for most.
- Struggle to raise the deposit business owners need to begin their retirement.
- Fail to raise adequate debt to buy you out or provide capitalisation and cash flow for the business.
- Employees are employees, not entrepreneurs – they might be able to adapt to the lifestyle and work habits.
Statistically, less than 30% of businesses go to family members. That means 70% get sold or eventually die. And when this happens on mass scale, it could affect the entire economy.
Some owners think they will find a strategic buyer.
Someone who will pay enormous an amount of money to buy your business because your company will form part of their group and they have strategic ways to reduce cost once they acquire your business. However, finding a suitable strategic acquirer is difficult because they have a plethora of businesses to choose from.
What can you do? Here are five quick ideas.
- Spend time building a business that can run without you. This gives you options. Maybe you never need to sell it, even after you retire. Build the systems you need to keep the business operational when you are away for long periods of time. To a buyer, this has enormous value and will help you achieve a higher asking price.
- Become the best seller on the market. Have a data room that contains all your paperwork. Get your accounts in order. Offer easier payment terms.
- Talk to a similar sized business and tell them you’d like to merge with them – as long as they agree to run the merger – enabling you to retire.
- Help your employees raise the money they need. Quite often it’s not money you need but skills, and your employees are already skillful in your business.
- Timing is critical. Sell your business when it’s doing well. Sell it when you don’t need to. Start early and be realistic with your expectations.
RCP work with owners. If you’d like to speak to one of the directors, give us a call. It’s a great place to start your exit journey.