In the past 15 years, setting up a business in the UK has become increasingly popular. There has been a burst of entrepreneurial activity as people have set up businesses for the first time. Yet after several years at the helm, many founders are now deciding it’s time to sell, whether for personal or commercial reasons.
Back in 2010, there were just 4.5 million private businesses in the UK, according to the Department for Business and Trade. That number had grown to 5.6 million at the beginning of 2023, slightly lower than its peak of 6.0 million in 2020, ahead of the Covid-19 pandemic and the UK’s formal withdrawal from the European Union. ¹
If you’re asking yourself, "how should I sell my business?" you’ll need to step back from running it day-to-day: developing products, looking after your staff, and negotiating deals. You must decide if selling your business is the right thing to do and, if so, groom the business for sale. That can take time as you introduce measures to create a good financial record, improve your working capital, check management information systems, and de-risk the business. Doing so will help maximise the business valuation.
But you must also be clear about your personal reasons for selling. "If I sell my business, what will that mean for my quality of life?" It’s important to step back and think about the bigger picture for yourself, your family, and your personal wealth. Planning ahead puts you in a position of strength.
There are many reasons for selling a business. Not least is the fact that a business has a growth lifecycle. That starts with the innovation behind founding the business—the clever idea. Next comes expanding the business, perhaps funded by external investors. At this point, you have reached the profit-taking phase where you may look at de-risking by taking out some of your initial investment. Finally comes the reinvestment stage when you plan what comes next: a new business, co-investment in other businesses, succession, philanthropy, or diversification.
From a commercial perspective, many entrepreneurs set up businesses with a view to selling them within five to 10 years. You’ll know when your business is ready to sell with a good record of growing profits that make it attractive to a buyer. You may also judge that you have taken the business as far as you can, and it needs a bigger company with the resources to reach the next stage in its growth.
You might also want to sell for personal reasons. After the Covid-19 pandemic, for instance, some business owners reassessed their priorities in life and decided to sell. But you might simply have reached retirement age or want to divert your energies to something else.
Lastly, you might have received an offer for the business that seems too good to refuse. Quite simply, there’s no easily defined set of reasons. Everyone’s circumstances are different, and everyone’s reasons will be personal to them.
Deciding when to sell a business depends on when the time is right for you and your business. But you may also want to sell at a time when there are plenty of potential buyers. More buyers equal more competition to acquire your business and potentially a higher business valuation.
Ideally, you want to sell your business when it has a record of several years’ profitable growth and is in a stable position that makes it attractive for acquiring businesses or investors. It can take several years to prepare your business.
But you also want to sell at the point of maximum interest in your type of business. Broadly speaking, this may be towards the end of a business cycle when the economy is growing quickly, and the cost of funding an acquisition through bank funding is relatively low.
Whether selling all of your business to another company through a trade sale, selling part of it to a private equity firm or another financial investor, selling to management, or exiting through a listing on the stock exchange, timing is key.
Whatever stage you’re at with your business, we’d welcome a conversation with you. Engaging with us as early as possible can make a big difference to business owners asking, "why sell my business?"
We can help you think through what’s important to you and your family and determine what part selling your business plays in that. These conversations are especially useful when you’re weighing up whether to sell or not.
If you decide to sell, we can connect you with the right pool of connections to maximise the business valuation—from professional advisors like corporate finance and tax specialists to business owners that have been there and done it before.
We can also provide wealth management services that help you to build the life that you want for you and your family. We can tell you more about our services when the time is right.
¹ : https://www.gov.uk/government/statistics/business-population-estimates-2023/business-population-estimates-for-the-uk-and-regions-2023-statistical-release
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