In pure financial terms, a business’s sale value is the sum of its asset value and the value of the goodwill, or, perhaps more realistically, what someone is prepared to pay for it. This is a more complex area and will depend on financial performance, strategic value to the buyer and the availability of alternative options.
Speak to any IFA in the UK and, chances are, they’ll tell you that on a weekly basis they meet business owners that list their business as one of their main assets - and usually a fundamental part of their later life financial planning. You probably won’t be surprised to hear that the business is usually listed in their financial statement at, yes, you guessed it, a nice round £1 million. Minimum. Seldom less. Funny that.
Deciding when to exit a business is often a question of balancing conflicting drivers; spending time in the business building its exit value versus exiting now for a lesser sum but having the time (and potentially health) to enjoy it.
I’ve previously worked with several software businesses and even been a Non-Exec Director in that space. I’m not a technical person, my input and value has been more strategic, commercial and governance related.
In a previous article I wrote about business owners being blind to the opportunities and strengths in their businesses;
Seventy to eighty percent of businesses don’t sell – that’s a widely reported statistic both in the UK and US where the markets for SME business sales are very similar.
Private Equity and Venture Capital firms are on the acquisition trail and arguably driving up the price of those businesses that meet their criteria as a result – but what are those criteria?
A phrase we’ve all, no doubt, heard on many occasions… but how often have you answered honestly?
A group of talented (well, mostly), wilful, ambitious, ego driven individuals, placed in difficult, challenging circumstances, all striving to win but split into political factions with opposing camps, ring leaders, trouble-makers, peace-keepers and highly watchable personality clashes and conflicts…