Jonathan Dunn

Jonathan Dunn

When is the right time to sell your business?

You have built up a successful business but, with your exit strategy in place, how do you know exactly when to cash in and move out?

You have built up a successful business but, with your exit strategy in place, how do you know exactly when to cash in and move out? 

There are plenty of reasons why entrepreneurs sell up, ranging from predictable events like retirement to the unforeseen, such as ill-health or divorce. Using data gleaned from more than 500 company sales over the last decade, sale advisor BCMS has identified six key reasons today’s entrepreneurs are selling up in record numbers.

  • Retirement – one or all shareholders wish to retire
  • Lifestyle change – a health-scare, exhaustion, and family commitments
  • Capital investment – scaling-up may be too big a challenge for the founder
  • Changing roles – the evolution from agile start-up to growing company demands different managerial skills. Some entrepreneurs struggle with this transition
  • Realise investment – many entrepreneurs get bored and sell up to start up something new
  • Market conditions – competitors being acquired, new entrants, or major regulatory changes point to a good time to exit a venture

Whatever the reason that drives an owner to seek a buyer, the big questions are the same – how to ensure you get the best price, and is there a right time to sell? In both cases, laying the groundwork is increasingly essential.

“Business owners are increasingly preparing their exit in more detail,” says Jonathan Dunn, Executive Director at corporate finance advisor BCMS. “In practice, they are busy tying up contracts, building their sales pipeline, and reducing dependency on the owners, long before their company goes to market.”

When entrepreneur Neil Needham and his co-shareholders sold windscreen repair business Autowindshields to the AA, they were the fifth biggest in the market.

“The other four companies were huge in comparison to us,” Neil says. “We wanted to get to that next level with the business. We had a turnover of around £5m, while our competitors were turning over £80m-plus.”

Conversely, for Tom Woodard – who sold his event registration software business to Canada’s Jonas Software, the right time to sell for him was more personal. “I’d had enough,” Tom recalls, “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.”

A sellers’ market
With UK corporate acquisition activity approaching an all-time high, there is no doubt that now is a good time to sell. BCMS’ Jonathan Dunn continues: “Larger firms are under pressure from their shareholders to improve margins, and for many the best way to achieve this is by acquiring high-growth smaller players. “When you add in private equity investors keen to back ambitious management teams, and the growing number of overseas players acquiring in the UK, it still feels very much like a sellers’ market.”

Serial entrepreneur John Ward sold his Linlithgow aerospace components supplier Fasteq to US giant Haas. Although he and his fellow shareholder were ready to sell, the process required a significant time commitment. “We realised that we would have to take time out of the business,” John says, “It was like speed-dating, meeting all these different potential buyers. But we found a buyer who we knew was a great fit for Fasteq.”

Of course, for every entrepreneur ready to exit, there are others who perhaps can’t see a way out. The latter – particularly in multi-generational family businesses – see selling up as final, rather than an opportunity to renew the business to safeguard its future.

With this in mind, BCMS has teamed up with Investec Wealth and Investment to discuss the right time to sell and explore what business owners go on to do afterwards at an evening panel event on May 10, 2017, in central Edinburgh. Speakers include entrepreneurs with firsthand experience of selling multiple businesses, including Neil Needham (ex-Autowindshields) and John Ward (ex-Fasteq).

BCMS LogoTo attend the event, please visit www.bcms.co.uk/edinburgh