Friday, 19 July 2013

It's Summer and the Possibilities are Endless

The Summer holidays are now upon us, and for many Business Owners this may represent the one time of year where they are able to exit the day to day running of the Company for a sufficient period of time to recharge their batteries and focus on the important aspects in their personal life; whether that be family, catching up again with friends, travelling or re-stoking once again their passions and hobbies.  This is the one time of the year when Directors get to throw the shackles and stresses of running a Company away and enjoy life, but it also presents the best opportunity to assess their current position, and ultimately answer the question every Shareholder should ask themselves – when am I going to exit my Company?

In fact ‘when’ is only part of the question, ‘how’ is equally important.  Vendors are often guilty of a spending their time in the Company focusing on the here and now, important matters that arise relating to clients, staffing or financial issues, and often the strategic planning for their personal exit is often overlooked, and regarded as a secondary requirement to ensuring the Company is a success.  Often however the two go hand in hand more than Vendors realise in a Business Valuation, with the value and desirability of the Company proportionally increasing with the Vendors awareness and implementation of a gradual exit.

Thinking of this logically, as a Buyer what Company would you pay more for – one that the Vendors have focused on growing as fast as possible, and therefore have concentrated and invested all their time and efforts in making it a success, but merely serving to creating an infrastructure that is reliant heavily on their input.  Or a Company where the Vendors have planned an exit for a 3-5 year period prior to taking to market, ensuring that the operation is fully managed and the clients long term and secure?  Buyers are purely concerned on risk, and no matter how profitable or fast growing the Company is, if the risk element in any area is high, the price you will receive will plummet accordingly.

This is why the Summer break is an ideal time for a Business Owner to take stock of their plans.  It may be that you have no intention of selling for 5 years, but would you rather start to implement gradual changes working towards a plan to achieve a smooth exit now, or frantically attempt to ‘shoe horn’ them in when you are in discussions with a Buyer and need to sell?

My advice for all Vendors over the Summer holidays is to enjoy the break, you have earnt it, but spend a few hours contemplating when you are going to exit, and how.  By starting to independently appraise your Company today will allow you to exit for the maximum amount, and ensure you can enjoy much longer holidays in the near future!

We can offer you a Business Valuation and provide you with further advice on how to go about your planned exit.

Adam Croft, Senior Business Broker

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