What keeps retiring business owners awake at night?

Let’s be honest, this article could go on ad infinitum listing every possible scenario, ranging from small but really irritating issues to events with the potential for total disaster.

Although there are a few hardy perennials, as the gardening fraternity would say, such as cashflow, staffing shortages, demands for wage rise, and ever-increasing overheads, there is one item that drifts on and off the agenda of every business owner, getting more persistent with time, and rightfully so.

I am referring to exiting the business, often referred to as succession planning.

You’ve worked hard for years, often decades, to build up what is arguably your largest asset, so you’ll want to make sure you can actually realise its full value when the day comes.

In fact, it isn’t simply an asset, but for most business owners, especially those who started it from scratch, it is an emotional attachment. It is, to coin a hackneyed phrase, their baby.

Not only that, but frequently the business owner has built solid relationships with the workers, sharing the highs and lows of each other’s personal lives, career achievements and success of the business itself. It is not uncommon to view one another as family.

So, what exactly do business owners fret about when contemplating selling their business and retiring?

In this blog we’ll narrow it down to two issues, both financial, and in some respects intertwined, but fundamentally different.

Firstly, let’s imagine your business is earning you a nice sum of money each year, between salary and dividends, even allowing for you to keep a safe sum within the business for reinvestment or a rainy day. Right now of course, there’s a lot of rain just over the horizon, following on from the deluge that we knew as Covid 19.

Your business is allowing you to enjoy the nicer and finer things in life, such as 2 luxury holidays a year, 2 executive cars, maybe an expensive hobby such as yachting or collecting antique clocks, not forgetting about of course about your holiday home in the Lake District. And we won’t forget to mention those hefty pension contributions, private medical care and a nicely appointed house, all after having paid school fees and given generously to charity.

But once it is sold, how much of that will evaporate?

Hopefully, over the years you have invested wisely and have a nicely diversified portfolio of property and shares, maybe wrapped up in a tax efficient SIPP or SSAS.

Passive income rarely replaces that of the daily grind, even if in latter years others are doing the heavy lifting and all you are taking a bit easier perhaps, but the business remains well profitable.

You get your lump sum, or perhaps an earn-out for 2 or 3 years, but what will you do with the money especially as the odds are that you will be ultra-cautious over its deployment, especially in recessionary times.


Wherever the money ends up, you’ll still face an income shortfall, maybe a precipitous one.

Which means that the fateful day is postponed again and again as the can is kicked down the road further and further. After all, another 4 or 5 years of handsome reward surely won’t go amiss, will it?

But at least the choice lies with you, it’s an informed decision and to be honest it is something faced by everybody in the workforce as they contemplate retirement, if that’s any crumb of comfort.

Then again you don’t want to leave it too late, do you?

You’ll be getting older and might not have the same drive and ability to steer your business, especially in today’s fast paced  and uncertain world.

Mistiming a sale by waiting too long is a common problem and one that can have a serious impact on value.

Which leads on to the second matter that business owners worry about.

“How much is my business worth?”

In fact, it is probably one of the first questions a prospective seller asks a business transfer agent or broker.

And their response is…..

“….well, it depends…”

“…on what?” asks the business owner

It depends on factors that are specific to the business in question, either intrinsically or something involving the owner’s personal circumstances, such as whether he or she has the ability to ensure a smooth handover or perhaps maybe the harsh reality is that the business is dependent on the owner.

More saliently, it depends on the market.

The market determines the value of the business, an inescapable fact, unless there is a compelling reason why your business should be worth more than anybody else’s business.

It might be.

Perhaps two or more buyers will end up scrapping over your firm for a strategic reason or maybe you possess a secret sauce what everybody is desperate to lay their hands on.

But all said and done, there is a narrow valuation band within which the vast majority of firms will be sold for.

So, business owners are quite right to lose sleep over this point in particular.

Is there anything you can do about it?

You may be surprised to learn that there is quite a lot you can do about it, but it will take time and effort, precisely at the point where you might find it too difficult to entertain.

Let’s dig a little deeper.

Maybe your business is not quite sales ready. In other words, if you went to market now you’d be missing out on near-term growth and improved profitability, or perhaps you would struggle to elicit an offer from anybody because of a serious problem.

A problem that you may not even have realised is a problem or perhaps it’s the elephant in the room and is such a knotty issue that you ignore it in the vain hope it will go away, just like toothache.

What sort of problem?

Let’s look at a couple of the more common ones.

Failure to collect invoices, meaning that you are in effect bankrolling your customers, which might well indicate that in the long term these customers are not viable. What if it is your largest customer, responsible for 20% of turnover?

Maybe your manager has you over a barrel in terms of remuneration, something that often goes hand in hand with being a troublemaker who has the ability to destroy the business, or at least scupper a sale, if they are not kept sweet.  What will happen when they get wind of a sale?

Whether it is an actual live problem per se or just a business running below its potential something needs to be done about it.

Not soon, but now!

But these things take time and could involve bringing in experts who can achieve what you have not managed to. Not a criticism but a harsh reality.

That means that if you really do want to sell next year the time to find out if both you and your business are in a position to go to market, is today!

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