There’s been a marked increase in business owners needing advice on how to sell their business as the pandemic has pushed them to think more pro-actively, as well as consider de-risking. Tim wants to explain why anyone contemplating exiting their business via a sale needn’t put their plans on hold.
Investors with capital are always looking for opportunities, no matter what is happening with the economy. Foreign buyers are also still active in the UK, despite ongoing uncertainty because of Brexit - sterling remains weak, giving UK businesses additional appeal amongst buyers. There’s been a solid demand for businesses that have shown themselves to be ‘COVID-proof’ – in terms of technology, automation, e-commerce and security – but also green shoots for struggling sectors such as hospitality.
Tim believes the pandemic has made lots of business owners evaluate what’s important to them. “The main impact of COVID-19 on the market has been prompted by uncertainty which has made people want to take charge of their own destiny. This has brought buyers to the table who weren’t there before - those who had never even considered running their own business.
“For these people, buying an existing business appeals because it is less risky than starting a business from scratch. It becomes even more appealing as they also have an existing customer base to immediately trade from. We’re predicting the market will return to pre-COVID levels in terms of business sales confidence by the autumn, so I’m expecting to support even more successful sales before the end of year.”
Preparing to exit a business might seem like it’s the end but Tim believes it’s important for business owners to realise that for whoever is taking over, it’s the beginning. A business needs to be scalable enough to demonstrate a viable future and knowing growth potential adds value to a business for potential buyers. Importantly, this shows buyers that an owner’s involvement in the company hasn’t been focused solely on the immediate performance, but also on the long-term goals.
“Business owners have to think about how they would answer questions that a potential buyer might ask. For example, what is the future potential of your business? What are your major competitors doing that you’re not? Be prepared to share your knowledge and understanding of the opportunities that exist within your sector and how they impact your business,” adds Tim.
“The time that you choose to sell your business is vital. On one hand, you need to be aware of how your business has grown and what its current vulnerabilities are resulting from this. On the other, you want to ensure that you have built sufficient value in your business to sell it at the best possible price. Business owners, whether serial entrepreneurs or would-be retirees, should always be looking at exiting their investment because this is intelligent business thinking.”
During the pandemic, Tim has had to adapt his usual day-to-day practices. He’s had to be more flexible in interactions with potential buyers, offering socially distanced viewings to ensure everyone could stay safe. However, even with the impact of COVID-19, there’s still been significant interest from a wide range of buyers.
“One way that we help business owners to sell is by identifying the types of potential buyers who would be the best fit. This has been more important than ever during the pandemic. For one of my clients, a garden furniture retailer based in Warwickshire, we targeted experienced businesses that were looking for ways to increase their summer sales. Having this ideal buyer in mind enabled us to focus all of our efforts into this and complete the sale successfully,” explained Tim.
“The client was a thriving business with many loyal customers and the owners were ready to retire after 20 years of hard work. Our experience in this sector identified that the ideal buyer would need to be someone who had the experience to take over the roles of the previous owners, along with synergy and in-house capacity to maximise the return on their investment. The clients were active in everything from purchasing and warehousing to customer liaison and even handling some deliveries. I decided the business would be a perfect match for buyers who were operating businesses that peaked during the winter but had spare capacity over the summer. Combining this business with their existing business would enable them to achieve consistent and reliable sales all year.
“After guidance from Business Partnership, the clients sold to a home fireplace business, a seasonal winter market that proved to be the perfect match for the summer-based garden furniture business. The owners of the Warwickshire based company achieved their goal of selling to someone who could ensure the business would continue to thrive, while enabling themselves to fulfil their retirement dreams.”
To find out more about Business Partnership Birmingham and Warwickshire or to get a free business valuation, please visit business-partnership.com