UKBA … practical advice that works from the independent experts

UKBA

… practical advice that works from the independent experts

Introduction Geof Steward & Bob Francis

“ The 5 Most Expensive Mistakes You Can Make When Selling Your Business”

Areas Covered Can you sell your business? Who is your buyer? How to make your business attractive? Looking for and evaluating choices 5 tips to protect your sale

Can you sell your business?

Who is your buyer?

How to make your business attractive?

Looking for and evaluating choices

5 tips to protect your sale

Huge Numbers of Businesses 4.5M SMEs 3.2 Million one person armies 1.3 Million with employees up 249 employees Source: BERR Small Business Service SME Statistics 1994 to 2006

4.5M SMEs

3.2 Million one person armies

1.3 Million with employees up 249 employees

50’s & 60’s Population Boom Leads to Business Selling Glut By 2010 baby boomers start retiring In 2006 there were more pensioners than children By 2029 there will be 5M more BB pensioners Source: Office of National Statistics – Pension Trends 2005

By 2010 baby boomers start retiring

In 2006 there were more pensioners than children

By 2029 there will be 5M more BB pensioners

It’s A Buyers Market Around 70% will transfer ownership in next 10 years That means up to 1.5 Million businesses will be transferred ! There will be fewer ‘younger’ entrepreneurs as buyers

Around 70% will transfer ownership in next 10 years

That means up to 1.5 Million businesses will be transferred !

There will be fewer ‘younger’ entrepreneurs as buyers

What Impact on Sales? Prices will fall Less attractive businesses will not sell More liquidations Costs continue to increase

Prices will fall

Less attractive businesses will not sell

More liquidations

Costs continue to increase

You may have a retirement plan in mind

You may have a retirement plan in mind

You may have a retirement plan in mind

You may have a retirement plan in mind

Average Life Span NOW: men 80 years, women 85 years By 2031: men 85 and women 90 You will need to fund yourself for 20+years Source: Age Concern Ageing Population Key Facts and Statistics 2007

NOW: men 80 years, women 85 years

By 2031: men 85 and women 90

You will need to fund yourself for 20+years

Will you be able to afford it? Approx 67% either have no idea or only know vaguely how much their pension will be Source: Office of National Statistics – Pension Trends 2005

Can you even Retire? Nearly half of all potential retirees think they would not have enough for a comfortable life Source: Office of National Statistics – Pension Trends 2005

80% of all one person business transfers fail 20% of all transfers of business with more than one employee fails Will yours be one of the staggering 1M businesses that fail to transfer Will you be able to sell at all? Source: DTI SBS Report Passing the Baton 2004

80% of all one person business transfers fail

20% of all transfers of business with more than one employee fails

Will yours be one of the staggering 1M businesses that fail to transfer

The main reasons for failure Lack of adequate planning in plenty of time At least 3 years in advance

Lack of adequate planning in plenty of time

At least 3 years in advance

Traditional Transfer Methods Close the business – sell the assets Sell to staff or family member Sell to competitor or supplier Sell to financial investor

Close the business – sell the assets

Sell to staff or family member

Sell to competitor or supplier

Sell to financial investor

Closing the business No or little residual value Redundancies Letting down friends Tax issues? No legacy

No or little residual value

Redundancies

Letting down friends

Tax issues?

No legacy

Selling to staff or family member Is the family member interested? Can you maximise value? Can they afford it? Are they as entrepreneurial as you? Your role after the sale?

Is the family member interested?

Can you maximise value?

Can they afford it?

Are they as entrepreneurial as you?

Your role after the sale?

Sell to competitor/supplier Do they see value or are they just taking you out of the game? Will they offer the best value to your customers? Will they keep you on to help in the transition stage? Redundancies (especially at management and supervisory level)

Do they see value or are they just taking you out of the game?

Will they offer the best value to your customers?

Will they keep you on to help in the transition stage?

Redundancies (especially at management and supervisory level)

Sell to financial investor MBO, MBI etc. Lower valuation than yours No loyalty to staff or customers In for quick returns Asset stripping

MBO, MBI etc.

Lower valuation than yours

No loyalty to staff or customers

In for quick returns

Asset stripping

Summary Poor payout Little or no involvement in process No choice who runs company No protection for employees All of which costs YOU money

Poor payout

Little or no involvement in process

No choice who runs company

No protection for employees

Where to go for advice? Bank Manager Accountant Business transfer agents

Bank Manager

Accountant

Business transfer agents

Bank Managers Many have never run an SME business Useful for information on loans and funding for the purchaser(?)

Many have never run an SME business

Useful for information on loans and funding for the purchaser(?)

Accountants No expertise in getting a business in a position to be sold. Useful for helping to put together, in conjunction with others, detailed figures for potential buyers

No expertise in getting a business in a position to be sold.

Useful for helping to put together, in conjunction with others, detailed figures for potential buyers

Business Transfer Agents No guarantees they will sell your business You pay whether they succeed or not Lengthy contracts You have no say

No guarantees they will sell your business

You pay whether they succeed or not

Lengthy contracts

You have no say

So the 5 most expensive mistakes are Lack of adequate planning Underestimating value of the business Not enough income generated for retirement Lack of control of the process Settling for quick/easy solution

Lack of adequate planning

Underestimating value of the business

Not enough income generated for retirement

Lack of control of the process

Settling for quick/easy solution

What Can You Do To Protect Your Business Value? Plan ahead- at least 3 years Maximise value by: Improving Cash Flow Reduce costs Increase Sales Strengthen balance sheet Get independent advice Sound out staff/family

Plan ahead- at least 3 years

Maximise value by:

Improving Cash Flow

Reduce costs

Increase Sales

Strengthen balance sheet

Get independent advice

Sound out staff/family

Our 6 Point Succession & Exit Programme Prepare business for sale

Prepare business for sale

Our 6 Point Succession & Exit Programme Prepare business for sale Locate suitable buyer

Prepare business for sale

Locate suitable buyer

Our 6 Point Succession & Exit Programme Prepare business for sale Locate suitable buyer Help develop future owner’s leadership & management skills

Prepare business for sale

Locate suitable buyer

Help develop future owner’s leadership & management skills

Our 6 Point Succession & Exit Programme Prepare business for sale Locate suitable buyer Help develop future owner’s leadership & management skills Determine fair value for business

Prepare business for sale

Locate suitable buyer

Help develop future owner’s leadership & management skills

Determine fair value for business

Our 6 Point Succession & Exit Programme Prepare business for sale Locate suitable buyer Help develop future owner’s leadership & management skills Determine fair value for business Plan knowledge transfer

Prepare business for sale

Locate suitable buyer

Help develop future owner’s leadership & management skills

Determine fair value for business

Plan knowledge transfer

Our 6 Point Succession & Exit Programme Prepare business for sale Locate suitable buyer Help develop future owner’s leadership & management skills Determine fair value for business Plan knowledge transfer Assist new owner to increase sales & margins

Prepare business for sale

Locate suitable buyer

Help develop future owner’s leadership & management skills

Determine fair value for business

Plan knowledge transfer

Assist new owner to increase sales & margins

Thank you for your time! Any Questions? Bob Francis & Geofrey Steward DGBA Tel:0845 4562394 Email: [email_address]

Bob Francis & Geofrey Steward

DGBA

Tel:0845 4562394

Email: [email_address]