Article

Ten signs that it's the right time to sell your business

Dave Rebbettes
October 2018

Why sell your business? This may seem a strange question, but understanding your motivation for exiting your company is an important step in getting the buyer, price and terms you want when the moment comes.

How do other business owners know the right time to sell up and move on? In truth, any business sale comes about from a mix of business and personal reasons unique to the owners.

To help company owners thinking of selling, BCMS has analysed 50 former client businesses to highlight some common themes.

You are ready to retire

The most common reason for selling a business – for around 40% of BCMS clients – is that you have come to the end of your working life and want to convert your years of hard work and long hours into a nest egg.

In truth, most retirees still have some years left in them, but are often also exhausted or have had a health scare to provide a catalyst for a business sale.

When former BCMS client Gordon McQuilton hit his late 50s, he began plans to exit the healthcare business he founded, and says:

I thought if I’m not careful, I would still be running my own business at 70 years old, trying to sell it.

Your work-life balance is out of sync

Family obligations, divorce, emigration plans, or simply a desire for a better work/life balance act as the main trigger in around a third of business sales advised by BCMS.

In these situations, enthusiasm and passion for running a business take second place to other priorities in life, providing owners with an opportunity to exit and focus on other life goals. The decision may be sudden or gradual.

Mark and Genevieve Rockett had run their marketing agency for 12 years – enjoying exponential growth – when this moment arrived. Genevieve says: "There’s no way we could have carried on for another 10 years like that. It gradually dawned on us that it was time to find a home for the business."

You are always stressed or exhausted

With a 60-hour working week common for today’s business owners, it’s no surprise that exhaustion is becoming a significant driver for owners to exit. While the symptoms of business owner burnout can appear slight – tiredness, short tempered or lack of focus – the compound effect can lead to severe health issues if left to build.

Event technology entrepreneur Tom Woodard realised he needed to change after hitting 50 years old.

“I’d had enough,” he says “I was running my own business and had acquired another one en route. I was ready for a change. Events are very tiring, and I didn’t have the same level of energy I had 20 plus years ago.”

You prefer starting businesses to running them

For entrepreneurs, starting a business is the most natural thing in the world. However, as the business develops you may have noticed that you’ve become increasingly stifled by the burden of managing and administering HR issues, health and safety, and IT upgrades.

You’ve taken your business as far as you can on your own, and the changing role means creativity, intuition and risk-taking give way to compliance, strategies and KPIs.

For telematics developer Winston Lee of Nyquist Solutions, this was his trigger for selling up.

“Life as a business owner had become quite stressful,” he said. “I’m terrible at managing conflict, and it was difficult to handle people as employees rather than as colleagues. I didn’t want to become a disciplinarian, it didn’t sit well with me. So that had an adverse effect on the business, and it was obvious that I needed to do something.”

Going global is too expensive

Even though you may have started out with world domination in mind, the high costs and risks of internationalising a business provide a natural exit point for many founding shareholders.

Common challenges range from pricing and payment methods to shipping and exchange rates, and from foreign laws and regulations to cultural differences or political risks. At this point in your business journey, you may wish to sell your company to someone with that global reach.

For example, hospital equipment manufacturer Sunflower Medical sold to Swedish industrial conglomerate Indutrade in 2017, and founding Managing Director Marc Byrnes says:

We have enjoyed growing the business to this stage, but with the international business really picking up now, we are keen to join a larger group with a significant overseas presence to help us scale up quickly.

Financial risks are beyond your comfort zone

For 10% of business owners who sold via BCMS, the big driver is personal financial exposure. As the growth curve demands further investment, this also becomes a natural point to pass the risks on and convert the equity into a financial return.

If the business is large and attractive enough, bringing in an institutional investor may solve the problem, giving the owners the option of staying on board as minority shareholders.

As former client Marc Noel of Impress Sensors, puts it: “Potentially, we could have put in another five years and doubled its size, and then think about selling. But we knew we would have to make more investment, and we didn’t necessarily have the appetite for that.”

Your business has reached a plateau

The flipside to the challenges of growth is not noticing when your business has peaked. Suddenly, that one-year blip of flat turnover and reduced margins is the ‘new normal’, as competitors pressure you to reduce prices, deliver faster, and offer new services.

This is notoriously hard to see, and even when you do, most business owners will naturally want to restore their fortunes before getting serious about a business sale. However, that requires a significant further investment, probably via heavy borrowing or reduced dividends.

At this point, both the company and the shareholders benefit from a sale.

You keep getting approached by acquirers

Acquisitive corporations and private equity funds alike do not wait around until you are ready to sell your business and are increasingly approaching target businesses to buy.

Sam Pemberton recalls how he came to sell video captioning software developer Softel. “We had been approached by a number of companies that were interested in purchasing Softel and it was at that point that we looked at BCMS.”

The shareholders don’t get on any more

Business relationships can deteriorate quickly, especially after years of disagreements. The cleanest way to resolve disputes is to sell the entire share capital to another party, allowing everyone to make a clean break. This allow all parties to move on without feeling one is getting a better deal than the others.

Some preparation is often needed here to prevent a difficult minority shareholder holding the others to ransom, such as using different share classes, exploring alternative structures, and getting the latest tax advice.

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Selling up to start something new

Around 20% of UK business owners own more than one company, often at different stages in the business cycle. With the experience gained on the first business, the pull of the newer venture grows stronger, creating the impetus to cash in on the first business to fund the next growth stage of the start-up.

Interestingly, BCMS has worked with several clients helping them to sell their ‘other’ business – and it’s fascinating to see how the experience of selling one gives entrepreneurs the resources and competence to grow and then sell a second, or even third company.

Serial entrepreneur and BCMS client Andrew Sesemann offers some expert advice: "Selling a business is not something you can do part-time, to be honest. I think that the fact that I had sold before meant I knew I needed to be responsive, focused and reactive to any queries. I think that’s what helped the deal get done so fast.”