- Original Poster
- #1
Hi, I am after some advice regarding a possible business sale and/or or the transition of my customers to a rival business.
Currently, I am the sole director of a corporate events business based here in the UK. I have been running the company since its formation in 2008 and the company had its peak sales between 2016-18 with a regular annual turnover during this period between £400-£500k and net profits (after all costs and tax) in the region of £80-100k annually. We employ no direct staff but use a network of regular freelancers and suppliers to deliver our projects, some on contracts, some on an ad-hoc basis.
As a business we have a number of long term customers. The majority of our customers we have worked with for over 10 years, a couple since the foundation of the business in 2008. These provide the bulk of our work, and we tend to pick up around 1 new customer a year, usually through existing contacts or recommendations. All customers are very large multinationals. Frequently our work involves international travel, long and unusual hours, weekends away from home etc. Our pricing is in line with the industry norm, perhaps towards the higher end in some scenarios, but this is reflected with the level of service we offer our customers.
Unfortunately Covid Lockdowns hit the business hard, as it did across the whole sector. Large, live, face to face events simply did not happen for most of 2020 and for much of 2021. Prior to that in 2019, customer uncertainty regarding Brexit also hit some of our regular European work. Sadly, we came out of lockdown with a business turning over just £40k in the 2020/21 financial year. Thankfully we had plenty of cash in the business to see us through, but cash reserves were heavily depleted.
We are recovering now, slowly building things up again and the turnover for 2023/24 is looking like it will be in the region of £200k with hopefully a net profit of £50k. The forecast for 2024/25 looks similar.
But there is a caveat to all of this. The sudden death of a good friend recently, combined with the birth of our second child has made me realise that life is short, and on balance, I think I would now prefer to spend less time working and more time with my family, to travel, sports & hobbies etc.
Running the business as a sole director, it has often felt like I can never fully switch off. There is always something to be done, and normally a number of projects running at any one time. And given the above goals, I am not sure if I want to sacrifice the time or have the drive these days to rebuild the business to the level we were at pre-lockdown. There are also other projects I am keen to kick off instead. I am thankfully in the fortunate position that our mortgage is all paid off (we have no debt). I also put a lot of the company’s spare cash over the years into a pension fund and my personal cash into other investments so that when I reach 55 and can access the pension, I should be able to retire, or at least take on some of the other projects, whether these generate income or not.
So the dilemma is what to do with the business?
I suppose I could just keep it ticking over for another 9 years, putting in minimal effort until I get to 55 and then close it. But I would probably still find myself in the same situation, with always a long list of things needing to be done. I could perhaps just close it down completely (which would be a shame), and pick up some lower-pressure consultancy, freelance or part time project work within the same industry to bring in an income that would easily cover our costs as a family. We prefer time spent outdoors in preference to material goods etc. so £40k annually should easily do it as our lifestyle is fairly simple.
Another option, and my preferred option, would be to sell the business to, or perhaps transfer our customers across to one of our current competitors. Realising some of the value in what we have, whilst also working for a year or two in partnership with whoever buys it, to help them develop their business and to transition my customers across. After years of being a sole director, mostly working from home, I know that I would really enjoy working as part of a larger shared-responsibility team again for a couple of years. It also means that with a team around me, I could enjoy my time off that little bit more – and perhaps for once, guilt free.
If I were to sell the business, I currently have three companies in mind as potential buyers, all of which I believe would be a good fit for my customers. But the question I have is where to start the ball rolling, how to make an approach (myself or via a broker), and how to potentially structure such a deal? All three companies seem keen to expand, but whether any of these would want to acquire another business to help them do so is an unknown.
As I am a sole director, I am integral to my business and therefore it is a given that there would be some sort of work out period while customers are transitioned (the relationships with our customers are mostly mine). I had in mind perhaps a 2 year work out for example, maybe working 3-4 days per week for the buyer. It is also a given that my business would be worth less than a similar business where the existing directors are easily expendable. Hopefully I am realistic about this.
Financially, I don’t actually need a huge sum of money from the sale. Since the lockdown in 2020 I have been paying myself a combination of salary and dividends of around £40k a year. We can live off this just fine. Any surplus has been going into the company pension scheme and helping to build back up the cash reserves (working capital) of the business. Hence for a 2 year hand-over, I would be happy to receive a lump sum of circa £100k after tax, plus say £40k per year for the 2 years work during the handover period (approx. £180k total over 2 years). This would allow me, once the transition is complete, to take a few years off work to travel with the family etc.
Anyway, I have the following questions which I would like some feedback on ideally, so I hope you can help:
How am I best to approach and get the ball rolling with potential buyers without revealing too much of my hand up-front.
Does what I am proposing sound a reasonable proposition for a potential buyer?
Would there be a more suitable alternative way of achieving the same end result, but perhaps structuring the sale and work-out in a different and more beneficial way than the option I have suggested?
If you were the potential buyer of my business, what potential concerns or questions would you have?
How could I best present the suggestion of such a deal in a way that made it the most attractive to a potential buyer, whilst giving me the outcome I am looking for?
Am I overestimating what is likely to be achievable, or on the flip side, selling myself short with the above proposal?
Thanks, and sorry for the very long first post, but I thought it important to share enough context so that it was clear what I am trying to achieve.
Currently, I am the sole director of a corporate events business based here in the UK. I have been running the company since its formation in 2008 and the company had its peak sales between 2016-18 with a regular annual turnover during this period between £400-£500k and net profits (after all costs and tax) in the region of £80-100k annually. We employ no direct staff but use a network of regular freelancers and suppliers to deliver our projects, some on contracts, some on an ad-hoc basis.
As a business we have a number of long term customers. The majority of our customers we have worked with for over 10 years, a couple since the foundation of the business in 2008. These provide the bulk of our work, and we tend to pick up around 1 new customer a year, usually through existing contacts or recommendations. All customers are very large multinationals. Frequently our work involves international travel, long and unusual hours, weekends away from home etc. Our pricing is in line with the industry norm, perhaps towards the higher end in some scenarios, but this is reflected with the level of service we offer our customers.
Unfortunately Covid Lockdowns hit the business hard, as it did across the whole sector. Large, live, face to face events simply did not happen for most of 2020 and for much of 2021. Prior to that in 2019, customer uncertainty regarding Brexit also hit some of our regular European work. Sadly, we came out of lockdown with a business turning over just £40k in the 2020/21 financial year. Thankfully we had plenty of cash in the business to see us through, but cash reserves were heavily depleted.
We are recovering now, slowly building things up again and the turnover for 2023/24 is looking like it will be in the region of £200k with hopefully a net profit of £50k. The forecast for 2024/25 looks similar.
But there is a caveat to all of this. The sudden death of a good friend recently, combined with the birth of our second child has made me realise that life is short, and on balance, I think I would now prefer to spend less time working and more time with my family, to travel, sports & hobbies etc.
Running the business as a sole director, it has often felt like I can never fully switch off. There is always something to be done, and normally a number of projects running at any one time. And given the above goals, I am not sure if I want to sacrifice the time or have the drive these days to rebuild the business to the level we were at pre-lockdown. There are also other projects I am keen to kick off instead. I am thankfully in the fortunate position that our mortgage is all paid off (we have no debt). I also put a lot of the company’s spare cash over the years into a pension fund and my personal cash into other investments so that when I reach 55 and can access the pension, I should be able to retire, or at least take on some of the other projects, whether these generate income or not.
So the dilemma is what to do with the business?
I suppose I could just keep it ticking over for another 9 years, putting in minimal effort until I get to 55 and then close it. But I would probably still find myself in the same situation, with always a long list of things needing to be done. I could perhaps just close it down completely (which would be a shame), and pick up some lower-pressure consultancy, freelance or part time project work within the same industry to bring in an income that would easily cover our costs as a family. We prefer time spent outdoors in preference to material goods etc. so £40k annually should easily do it as our lifestyle is fairly simple.
Another option, and my preferred option, would be to sell the business to, or perhaps transfer our customers across to one of our current competitors. Realising some of the value in what we have, whilst also working for a year or two in partnership with whoever buys it, to help them develop their business and to transition my customers across. After years of being a sole director, mostly working from home, I know that I would really enjoy working as part of a larger shared-responsibility team again for a couple of years. It also means that with a team around me, I could enjoy my time off that little bit more – and perhaps for once, guilt free.
If I were to sell the business, I currently have three companies in mind as potential buyers, all of which I believe would be a good fit for my customers. But the question I have is where to start the ball rolling, how to make an approach (myself or via a broker), and how to potentially structure such a deal? All three companies seem keen to expand, but whether any of these would want to acquire another business to help them do so is an unknown.
As I am a sole director, I am integral to my business and therefore it is a given that there would be some sort of work out period while customers are transitioned (the relationships with our customers are mostly mine). I had in mind perhaps a 2 year work out for example, maybe working 3-4 days per week for the buyer. It is also a given that my business would be worth less than a similar business where the existing directors are easily expendable. Hopefully I am realistic about this.
Financially, I don’t actually need a huge sum of money from the sale. Since the lockdown in 2020 I have been paying myself a combination of salary and dividends of around £40k a year. We can live off this just fine. Any surplus has been going into the company pension scheme and helping to build back up the cash reserves (working capital) of the business. Hence for a 2 year hand-over, I would be happy to receive a lump sum of circa £100k after tax, plus say £40k per year for the 2 years work during the handover period (approx. £180k total over 2 years). This would allow me, once the transition is complete, to take a few years off work to travel with the family etc.
Anyway, I have the following questions which I would like some feedback on ideally, so I hope you can help:
How am I best to approach and get the ball rolling with potential buyers without revealing too much of my hand up-front.
Does what I am proposing sound a reasonable proposition for a potential buyer?
Would there be a more suitable alternative way of achieving the same end result, but perhaps structuring the sale and work-out in a different and more beneficial way than the option I have suggested?
If you were the potential buyer of my business, what potential concerns or questions would you have?
How could I best present the suggestion of such a deal in a way that made it the most attractive to a potential buyer, whilst giving me the outcome I am looking for?
Am I overestimating what is likely to be achievable, or on the flip side, selling myself short with the above proposal?
Thanks, and sorry for the very long first post, but I thought it important to share enough context so that it was clear what I am trying to achieve.
