18 Nov Time to Sell Your Business?
Over the last nine months I have read posts on industry bulletin boards and received several ‘Private & Confidential’ letters through the post from investors, some who are either unknown, or little known within the industry, interested in buying promo businesses. How flattering this may seem to owners, but perhaps not.
Yes, it is true that there have been many more acquisitions of late made by established larger distributors of smaller ones. This is understandable as there are good and valid reasons for such acquisitions. But, let’s face it, how many acquisitions actually take place because they are an obvious final piece in the career jigsaw of a business owner?
What motivates an owner to sell their business?
Maybe part of that motivation is the same reason why they set up a business in the first place, namely, to enjoy the financial rewards of running a successful business and cash in and retire at the ideal moment. Or perhaps they have found another opportunity that excites them more. This is typical of entrepreneurs who enjoy the business creation process but not the scaling up part or have just become bored with what they have done for a long time.
Unfortunately, for many sellers, these ideal scenarios are not a reality and the motivations may be quite different. Reasons may be that the owner(s) have lost their passion for the business because of difficult trading conditions, are exhausted and possibly burnt out or have run out of cash and are unable to support their lifestyle. If the business is jointly owned and there is a personal dispute, then this may result in a forced sale. Unexpected illnesses of either owners or their dependents may also leave no option but to seek a buyer.
All these not so inspiring reasons to sell their ‘baby’ may lie behind the sudden interest from potential buyers/investors. After all, a ‘distressed business’ which can be bought on ‘the cheap’ is exactly what a buyer is looking for. Possibly, an investor will look to buy several such businesses in a particular sector and combine them in order to sell them as one at a substantial profit as soon as they can. If the business is in a negative net worth position, the business may still be attractive to an investor who may offer £1 and take over the liabilities if they believe that there are enough ‘hidden’ assets within the business to benefit.
The current financial impact of COVID19 on our industry is obvious to all stakeholders. The closures or limited activity of critical sectors such as conferences and exhibitions, travel and tourism, hospitality to name but a few, has resulted in many companies struggling to keep their businesses afloat and no doubt an offer to buy your business might seem an attractive option. After all, selling your business sounds like a successful story, but if you are still not financially secure as a result, then this may not be the ideal solution to the present difficulty. This is why previously, I have suggested that changing the way you work may be a more appropriate solution; a way in which an owner can keep their independence and be in a position to take advantage of the opportunities when the sectors open up once more.
Some of the less attractive reasons to sell before these critical sectors open up again, could mean that owners will be selling at the worst possible time. Such decisions may seem to be the right option for now, but may not be in six or nine months when, it is anticipated that there will be a certain amount of normality back in our lives. Regret is not something that any of us want to ever feel, especially those that have invested a great deal of ‘blood sweat and tears’ into making their dreams a reality. For the moment, forget ‘Buyer Beware’, it is more a case of ‘Let the Seller Beware’!