Business to sell - Advice sought

[newchallenge21]

Afternoon all.
I am looking for some advice on selling my business as I am looking to retire, or at least retire from my current business in early 2021. I realise this is a couple of years away but I just need to get a plan of action in place. Brief details as follows; Ltd Company, 2 x directors, trading 25 years, service industry, turnover c400k+.
Complications are myself and my fellow director own 50% of the company each so both need to agree on the eventual sale. My initial thoughts are it would make an ideal bolt-on business for a company that has ambitions to move into our field and has admin staff already. My thinking being that as my fellow director and I are the only office based staff, substantial savings on salaries would be made ( = profit)
Any pointers on where and how to start this process without alarming our customers or suppliers, and most importantly our staff, would be appreciated.

Thanks in advance

 

[Lisa Thomas]

Jumping ahead quite a bit - when the business is sold consider exploring whether an MVL might be a suitable exit plan for the Shareholders to make potentially large personal tax savings.

 

[Lisa Thomas]

*Members Voluntary Liquidation

 

[The Byre]

The moment you mention selling a company, all sorts of shady creatures (known to their mothers as business brokers though there are other words for them) will start clamouring at your door, wanting you to buy a listing on their websites. If you take a bath, don't be too surprised if you find one or two of them nestling in the soap-dish!

I suggest you talk to someone like @Clinton and have a good read through his website.

http://resources.theexitfirm.co.uk/ http://ukbusinessbrokers.com/

I sold a company back in 1999 and it took over a year of restructuring the business, just to make any kind of sale possible, followed by another year of hand-over, with payments. Your company has to become completely self-sufficient and function perfectly without you and your partner having to attend to it on a daily basis.

I had expert professional help and without that help, I would have got absolutely nothing!

In other words, if you are your business, then there is no point in anybody buying the thing!

 

[Clinton]

Thanks for the mention @The Byre

... it would make an ideal bolt-on business for a company that has ambitions to move into our field and has admin staff already. ...

I cringe when I hear the "ideal bolt-on" words.

Everybody and his dog seems to think they are an "ideal bolt-on"!

The thinking behind those dreaded words goes something like this: A financial buyer (somebody working purely on the numbers and a formal valuation) will only pay me £x. But a buyer who's in the same industry will benefit a lot more from acquiring my business so they will pay me a lot more than £x.

This is flawed thinking.

First, buyers will want to pay you based on what you've got, not what you think they may be able to make in future. Not even that they think they'll be able to make in the future!

Second, by positioning yourself as a bolt-on, the message you're giving to the market is that you're damaged goods, that the business needs somebody with industry skills and knowledge. Given this handicap,and your severely limited pool of buyers - just people with industry knowledge - you're effectively saying you'll accept a much lower price.

Third, bolt-on sales typically involve long earn-outs ie. you're telling the market that you don't want cash for your business but you'll take payment in dribs and drabs over the next several years if your business delivers to sales and profit targets in every accounting period. Should you business not deliver you'll get zilch. (And the buyer will set very ambitious targets if he's going to do a deal!)

My recommendation: If you don't have competent second level management that can handle the entire running of the business then accept that you aren't an attractive acquisition target. Most buyers won't touch you with a barge pole. Start working from that base!

Next, appreciate that the buyer is not going to be saving anything. To replace you and your co-director, the buyer will need to have at least two new wages going out. This could possibly be 3 or 4 new wages (as employees don't work as hard as owners). You're assuming he'll make substantial savings by using his existing employees? No, the cost for those employees will need to come out of what your business generates.

You underestimate buyers. They aren't stupid! Buyers want to see proof that the business can run without the two key parties. And they'll want to see at least 2-3 years' worth of that proof. So they're not going to accept your premise that the business will function as normal if they replace you two with two of their employees. C'mon, surely even you don't actually believe that it will?!

 

[quikshop]

It will need to be a clean purchase by any interested party, so tidy up the books, make sure directors loans and various intangibles are all paid off and in order, and simplify the ownership as much as you can - at the very least have a pre-sale agreement in place between majority shareholders to transfer their holdings to the new owner on completion of the terms of sale.

The moment you mention selling a company, all sorts of shady creatures (known to their mothers as business brokers though there are other words for them) will start clamouring at your door, wanting you to buy a listing on their websites

Yeah, this. I attempted to buy a high street business in Shrewsbury a few years back. Having visited the property a couple of times we made an offer through their broker. Several emails went backwards and forwards and in the end what we felt was a more than generous structured offer was rejected by the broker so we walked away.

I learned some time later from the business owner that he was never told about our final structured offer by his broker, in the end he simply closed up his business and walked away... such a shame.

 

[newchallenge21]

Thanks all so far for your comments, this is exactly why I posted on here.
I can see that I need to do some serious thinking about what my best course of action is.
I appreciate that just because I have been in business for 25 years doesn't make me an expert on business, I'm just very good at my job. I have employees to consider as well and I take my responsibility to them seriously. I think traditionally my type of business would have been passed down to the next generation but unfortunately this isn't an option.

 

[KellyBDE]

@newchallenge21 depending on where you are in the UK, I know a solicitor who specialize in assisting clients plan where they want to be and how they are going to get with the legalities included along the milestones.

 

[Clinton]

because I have been in business for 25 years doesn't make me an expert on business...

It makes you an expert in your business. It makes you less than an amateur at selling businesses... but there's no shame in that. My advice would be that with anything involving actually selling, or planning for a sale, use someone who is an expert in selling businesses ... but I would say that, wouldn't I?

 

[WebLord]

Appreciate everyones input thanks.
Been busy with daily hospital back and fore so not been on here since posting!

The business was setup ready to go but never had time to 'start'...
So basically, its an online jewellery shop - www dot jewelclub dot uk (can't post the url as have under 30 posts still!) - comes with co uk also
plus all the stock thats on it - would prefer to sell it if possible as a package but would split if had to.

Will go through all the lists / links that everyone has posted, but if anyone is interested for themselves please let me know!

Open to offers I guess... stock was about 2.5k (can get actual listing and exact price is requested) plus the cost of the site build and domain.

 

[The Byre]

Open to offers I guess... stock was about 2.5k (can get actual listing and exact price is requested) plus the cost of the site build and domain.

The website is a mess and not worth anything and so your 'business' is just boxes of stuff - having boxes of stuff is not a business. Unlike the OP, you have no turnover, so my strong recommendation would be to just flog that lot off on eBay.

 

[Mr D]

Appreciate everyones input thanks.
Been busy with daily hospital back and fore so not been on here since posting!

The business was setup ready to go but never had time to 'start'...
So basically, its an online jewellery shop - www dot jewelclub dot uk (can't post the url as have under 30 posts still!) - comes with co uk also
plus all the stock thats on it - would prefer to sell it if possible as a package but would split if had to.

Will go through all the lists / links that everyone has posted, but if anyone is interested for themselves please let me know!

Open to offers I guess... stock was about 2.5k (can get actual listing and exact price is requested) plus the cost of the site build and domain.

Stock is not necessarily worth as much to someone else as you paid for it.
There are places that will buy excess stock but not much money - they then have to try flogging the stock to retailers so have their own markup to consider.