Who better than to learn from one of the Sell Your Business co-owners, than Joanna! She can rightfully offer lessons learned from selling a UK business! I interviewed Joanna in the hopes that her experience will shed some light on various factors that might be able to help you or prevent you from making mistakes.
Lessons Learned From Selling A UK Business
Kim: What was your original business exit plan?
Joanna: The original business exit plan was actually not to exit! It was to focus on getting the company to a position where it remained very profitable and could run without me at the steering wheel. I was hoping for an arrangement that would allow me to go do something else while the business continued to generate income for me and my partner (who was also the majority shareholder).
Kim: Well, that being the case, what triggered your desire for a business exit?
Joanna: I was looking for options to reap the reward of the hard work that I had put into the business. I mean, of course, I wasn’t in the business for the sake of business, but I have some personal goals too. However, it was my business partner’s sudden need to cash in and de-risk for the sake of his family that was the main reason for our deciding to sell the business. I would class our business exit as a distress sale as we allowed circumstances to dictate the sale instead of choosing our window of opportunity.
Kim: So, are you saying you didn’t have enough time to plan?
Joanna: Yes. We sort of tried to rush into the sale and discovered many things as we went along. This wasted a considerable amount of time and energy. We were looking for the buyers, preparing documents, and doing our usual business all at the same time which included market entry into the US! I think if we had given more thought to the business sale, things could have been much easier.
Kim: How did you find the process emotionally?
Joana: Exhausting and emotionally draining to the point where I couldn’t function outside of work as I only had just enough energy to keep the business and sale process going. It was a long 22 months as only 3 people (including myself) in the business out of 40 knew we were selling it. I akin it to a never-ending boxing match with unlimited rounds and varying lengths of timed rounds, feeling the effects of punches and rarely being able to punch back and control the round. I was barely dragging myself around by the time we entered the negotiation stage. It can take a lot of time and energy. There’s just no way around the stress and the long hours, I guess. I tried to keep my focus and manage my schedule, but 22 months is a long time.
Kim: What was the final outcome?
Joanna: We made an endless number of presentations and held umpteen meetings, but were frustrated every time. After the last sale attempt fell through, I left the business as an employee. I felt I had nothing else to offer and hated the business and what it had done to me. I was running on empty in terms of energy levels. My business partner stayed behind and 2 months after I left the business, it was successfully sold for millions.
Kim: In hindsight, what are the top 5 things would you have done differently, if anything?
Joanna: Very difficult to answer, as I was the minority shareholder and really had no decision making power, even though I was listened to from time-to-time. However, having seen the business sale process up close, I can say that if I was the majority shareholder, I would have:
i) Refused to enter the USA market while trying to sell at the same time as the US was a massive distraction and took a lot of my time. I would have focused on our core business and our core business only because we needed to prove that we were over-achieving our forecast numbers and I could focus my attention on the business sale process more.
ii) Chosen to have more time to prepare to sell. This would have saved me from trying to juggle two full-time roles at the same time and truly focus on aspects of the business that would have maximised its exit value more.
iii) Not been greedy and be more aware of deal fever – I would have looked at what the realistic multiple was before short-listing offers. I would have accepted offers as they were above walk-away price tag despite the offer being made by a competitor. I should have also been wary of the big 7 figures that were being thrown around but emotions were on a roller coaster ride and energy levels were on low. Conversely, I would have walked away when the offer was lower than the walk-away price because the business’ intrinsic value was worth more and would give us a better return than say investing that cash in a different instrument e.g. stocks, property, etc.
iv) Told my senior management team that the business was for sale because I trusted them. This would have taken the pressure off myself having to personally keep the data room updated, make up a number of cover stories as to why I wanted certain information from the rest of the business, and I wouldn’t have to have hold all the technical and operational meetings with prospective buyers by myself.
v) Loved to have kept a detailed diary during the sale process as events got a little blurry and as the offers came in it was difficult to remember what happened when and why. A diary would have also helped me have an outlet for my emotions and would have been useful remembering if certain meetings went well or not.
Well, well…You can see that business sale is treacherous territory. Joanna was frustrated by the market expansion side-by-side with the business sale, but the owner was probably trying to maximize the sale price. Patience is key, and preparedness necessary.
Kim Brown, Co-Founder of Business Wand, helps business owners navigate their way through the start to finish process of selling a business. Her specialty is to help owners cut costs and increase profits prior to sale. To understand how you can sell your business quickly for the highest sales price, purchase the book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale”