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ARE YOU THINKING ABOUT SELLING YOUR BUSINESS ? Essential steps for preparing your exit ...
At PCH we often help business owners to plan the selling of their business , preparing for succession or retirement . The steps needed are very similar to planning growth in a business .
Knowing what the specific outcome might look like for you , will define exactly how to approach it – even years in advance .
Here is an overview of some basic considerations in preparing for that exit :
1 . Define what life you want after your exit – set this as the goal .
2 . Define what the business valuation needs to be on the day of sale , to give you that life .
3 . On that day , the business must be able to run operationally without you , start planning that as soon as possible .
4 . The valuation you desire will define what revenue / profit / assets the business needs to have on that day , as well as what scale the business needs to achieve to make that possible .
5 . This will indicate roughly how many products or services you would need to be selling per year at that stage – how many customers you will have ? how many staff you will need , what systems you will need ? along with all the other business considerations at scale . 6 . If it doesn ’ t seem feasible , decide what needs to change as soon as possible . 7 . Outline a timescale to make scaling a reality . 8 . Get help to plan the scale-up , define “ Goal - Strategy -
Plan – Actions – and accountability .” 9 . Define the roadmap of activities and milestones 10 . Get started !
START AT THE END : What is your future life going to look like ? When would you like it to be ? Will you still work ? Travel ? Will you still be connected to your business in some way ? Will you work with a charitable organisation ? Start a new company ? Indulge in new hobbies , spend time with loved ones ? How much money will you need to do all the above , will that be a lump sum or will you need annual earnings still ? Will you worry about your team or staff and their futures ? All of these considerations will dictate what your company needs to look like on the day you exit – and how you exit .
Also consider what your target price might be at point of exit ? What will that figure be ?
VALUING THE BUSINESS FOR THE DAY OF YOUR EXIT : Having decided on the target sale price – the next step is understanding how that might be calculated . There are many detailed ways to calculate a business valuation using professional services , but a simple way that will give you a rough indication is :
4 x Net Profit + Asset ( inc . IP ) - liabilities + ( Goodwill )
Goodwill is somewhat nebulous but can include your forward order book , position in the market , market share , licences , legislation and potential future market .
You might have a business which turns over £ 3 million – that doesn ’ t mean it ’ s worth that . Your business might be only be worth £ 1million depending on its profitability . As an example , to get a valuation of £ 3 million , the business might need to scale to a revenue of £ 9 million , depending on profitability . The trick is to design the business that will give you the valuation with the least amount of cost and effort .
SCALING UP : This will require changes in your business to allow you to scale , to design it to run without you and plan all the necessary steps to make it all happen .
For this , most business owners need help . It can be very difficult to see the ‘ wood ’ for the ‘ trees ’ and to step away to plan . Being able to step out of just being busy , to be able to plan the changes isn ’ t easy but with a structured process works ! - and it has for a number of clients .
If you are thinking of your future exit – let ’ s have a conversation !
PCH Business Consultants is a Business Growth Consultancy with a difference , with almost 30 associates and experts , focussing on £ multimillion Engineering , Manufacturing and Technology companies , but with experience across most sectors . www . pch-consultants . co . uk
THE BUSINESS EXCHANGE 2024 19