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What's The Difference Between An Asset Sale and Share Sale?
Stuart Mason • 23 September 2024
What's Best For You? An Asset Sale or a Share Sale?
The Great Business Sale Showdown: Share Sale vs Asset Sale
So, you’ve decided to sell your small or micro business. Well done! You’re ready to kick back, retire, or maybe start that alpaca farm you’ve always dreamed of. But before you run off into the sunset, there’s one crucial decision to make: are you going to sell the business through a share sale or an asset sale?
Don’t worry, we’ll keep things simple, throw in some humour, and sprinkle in examples to make it crystal clear.
Share Sale: "The Whole Shebang"
Let’s start with a share sale. In this type of sale, you're basically handing over the keys to the entire kingdom—warts and all. If you’re a limited company (meaning your business is its own legal entity), you sell your shares in the company to the buyer. The buyer takes over the company, including all the good bits and the not-so-good bits—staff, contracts, equipment, debts, liabilities… everything!
It’s like selling a car. You don’t take out the engine and tyres and hand them over separately; you sell the entire car as-is, hoping the buyer doesn’t notice the squeaky brakes or that mysterious stain on the back seat.
Remember though, any buyer with a functioning brain cell will be carry out extensive Due Diligence, so be prepared for that – and guess what? We can help with that too,
Example of a Share Sale:
You own "Betty’s Bakery Ltd.", a small company you’ve been running for years. Someone’s interested in buying the bakery, so you agree to a share sale. This means the buyer is purchasing all of your shares in Betty’s Bakery Ltd., which includes the ovens, recipes, your staff, the lease for your shop, and that weird supplier contract you signed after one too many glasses of wine at a trade show.
Once the deal is done, Betty’s Bakery Ltd. is now legally owned by the buyer. You walk away with the money, and the buyer walks away with the bakery exactly as it is—including any potential legal disputes or surprise tax bills hiding in the paperwork. You’re done. Clean break.
Asset Sale: "Pick 'n' Mix"
Now, let’s talk about the asset sale. This is more like a ‘Pick 'n' Mix’ scenario. The buyer chooses specific assets they want, and only those assets. This could be your equipment, your customer list, maybe a few contracts, but not the entire business. They’re just cherry-picking the things they fancy.
The company itself remains your problem, meaning if there are any skeletons in the closet (debts, liabilities, an angry ex-employee), they stay with you. It’s like selling a house but keeping the dodgy plumbing and the leaky roof for yourself. Lucky you!
Example of an Asset Sale:
You own "Alfie’s Auto Repairs", and a buyer is interested in the equipment you’ve built up over the years—hydraulic lifts, diagnostic tools, maybe even your client list. In an asset sale, they buy these specific items, but they don’t take over the entire company.
So, Alfie’s Auto Repairs as a legal entity stays with you, and you’re still responsible for paying off any remaining debts, dealing with outstanding tax obligations, or keeping that long-term employee you didn’t really want to tell about the sale.
In this case, you sell off what the buyer wants (the assets), but you’re left to wrap up any loose ends that come with running the business. It can be more work, but it also gives you more control over what you’re selling.
Key Differences (In Case You Skimmed Everything)
1. Ownership Transfer:
o In a share sale, the buyer takes over everything—the whole business, including liabilities.
o In an asset sale, the buyer only takes what they want, while you keep the rest (including liabilities).
2. Risk to Buyer:
o In a share sale, the buyer takes on all the risks (old debts, legal issues, etc.).
o In an asset sale, the buyer can avoid taking on the dodgy parts and leave you with any baggage.
3. Tax Considerations:
o For the seller, a share sale might be more tax-efficient because you’re likely to qualify for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), which reduces your Capital Gains Tax.
o For the buyer, an asset sale can sometimes be more attractive because they’re not taking on liabilities, but they may not get the tax benefits you would with a share sale.
Final Thoughts: Which is Right for You?
If you’re ready for a clean break, want to hand over the entire business, and are OK with transferring everything to the buyer—including any hidden headaches—then a share sale is probably your best bet.
But if you only want to sell off parts of the business (maybe to get a quick cash injection or to slowly phase out), and you don’t want the buyer touching your dodgy contracts or that employee who still hasn’t figured out how to work the photocopier, then an asset sale could be the way to go.
Just remember, whichever route you choose, it’s ESSENTIAL to get a lawyer on board. They’ll help make sure you don’t accidentally sell your prized collection of company pens or forget about that unpaid tax bill from 2018.
Good luck with your sale—and here’s to that future alpaca farm!
Picture this: you're selling your business, and suddenly you're bombarded with fancy acronyms like SDE and EBITDA . Let's break it down with a dash of humour - because we like to keep things simple. SDE (Seller's Discretionary Earnings) is like the superhero cape of your business. It's your earnings plus all those extra perks and quirks that make your business special. Think of it as your business's "net income" plus the sweet perks like company car usage, travel expenses, and that weekly pizza party you throw for your team (because happy employees are productive employees, right?). On the other hand, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is like looking at your business through X-ray vision. It strips away all the extra fluff (like those pizza parties) and focuses solely on your business's operational performance. It's like saying, "Hey, let's see how much money this baby is making before we start considering the financial gymnastics." In simple terms, small businesses tend to use SDE , and it’s always a juicer figure than EBITDA which is usually reserved for the mid to large businesses… aka “The Big Boys” (Gender Neutral Term). So, when it's time to sell your business, remember this: SDE adds the sparkle and charm, while EBITDA gives you a no-nonsense, stripped-down view. SDE will always be more than EBITDA. HOWEVER... ***WARNING*** - The Homer Simpson RED ALARM... Just because it "values" more, does NOT mean you'll SELL for more. It's like trying to sell your house with or without all the fancy furniture inside. One's the full package deal, and the other's the bare bones. Choose wisely, and may the sale be ever in your favour. Now the really super icing on the cake bit, with a cherry. You can get your FREE business score and see how your business compares with others in your industry (much better surely), and… yes, using the SDE Valuation, an indication of how much your business is worth. How cool is that? Well also add another cherry (watch those calories) as we’ll include some hints, tips and advice on how to IMPROVE your business VALUE – so you can buy MANY more pizzas and cakes. Sound fair? If you want extra Pepperoni on your business sale, let’s have a chat. You’ll be surprised how easy it is to ADD value.
How To Value Your Business - Explained I n A VERY Simplistic Way Valuing a business can feel a bit like trying to price up a second-hand car - there are some general rules of thumb, but everyone’s got an opinion, and the final price might surprise you! Let’s walk through a simple approach to give a rough idea of what your business might be worth, using the fictional Widget Co. as our guide. It’s a true saying, “ask ten people to value your business, and you’ll get eleven answers”. This blog post is intended to be the roughest of guides as sadly too many business owners think their non profit making business is worth millions. It could be, but it’s unlikely. Step 1: Start with the Profit (or "How much dosh does this thing actually make?") First things first, buyers want to know how much profit the business makes. Widget Co. had a turnover of £400,000 , and after paying for everything from widgets to wages, the net profit was £59,000 last year. In the business world, people often talk about “multiples of profit” when valuing a company. A typical small business might sell for somewhere between 2 to 4 times its annual profit. Some are more, some are less, this is a ROUGH guide. So, let's take the £59,000 net profit and multiply it by, say, 3 (a middle-of-the-road figure for simplicity’s sake): £59,000 x 3 = £177,000 That’s a ballpark estimate for the value of Widget Co. based on profits alone. Step 2: Add the Value of Your Assets (because stuff matters too!) Now, let’s not forget that Widget Co. owns some pretty valuable things. They’ve got a small industrial unit worth £180,000 and other assets (like equipment, machinery, maybe a couple of laptops and a kettle) valued at £85,000. The value of these assets gets added to the price because, well, they’re worth something! So, add up the assets: £180,000 (industrial unit) + £85,000 (other assets) = £265,000 There’s other considerations too, such as intellectual property, customer data (goodwill) etc. These are a bit more complex to value, however, they must be considered. Again, let’s keep it real. A Go Daddy website with a basic shopping cart is not going to be worth £250,000. Step 3: Combine the Two (It’s adding time!) Now we combine the value of the business based on its profit with the value of its assets. £177,000 (profit-based value) + £265,000 (assets) = £442,000 Voilà! We now have an approximate value for Widget Co. of £442,000. Step 4: But Wait, There’s More! (Or Less…) There are a few other things to consider that might nudge the value up or down. For instance: • Debts: If Widget Co. has any loans or outstanding bills, you’d subtract those from the value. No one wants to buy your debt along with your widgets. • Growth potential: If Widget Co. has been steadily increasing profits year after year, a buyer might pay more because the future looks bright. We call this “Growth Potential” and have an entire SERIES of modules built around it. It’s THAT important. Again, here’s the warning. These MUST be based on realistic numbers, and not a “pie in the sky” figure. Your £95,000 business is unlikely to have a growth potential of £5m. • Market conditions: If the market for widgets is booming, that might push the price up. On the flip side, if everyone’s gone off widgets and started buying gadgets instead, it might lower the value. Step 5: Have a Chat with a Pro (Because there's always something we've missed!) This gives you a rough idea, but when it comes to selling a business, it’s always a good idea to get a professional involved, like a business valuer or accountant. They’ll help you dig into the finer details and make sure you’re not leaving any money on the table—or asking for way too much. We help you prepare for sale and BUILD value, getting an unbiased, independent valuation is key. Sadly, we see too many brokers massively overvaluing businesses simply to get the upfront fee. Also, avoid your mate down the pub, they can be accurate to +/- 2000% Summary: Widget Co.'s Value • Profit-based value: £177,000 • Assets: £265,000 • Total: £442,000 (before any adjustments for debts or market conditions) And there you have it! A simple, lighthearted way to get a rough idea of what your business is worth. Now, go forth and sell that Widget Co. for a tidy sum! Or start to prepare your business to sell for MORE. Hold On, Someone Mentioned EBITDA – What Is That? Let’s dig a bit deeper into business valuation by introducing a slightly fancier concept: EBITDA. It’s one of those acronyms that sounds scarier than it really is, but once you get to know it, it can be your best mate when valuing a business. What’s EBITDA and Why Should I Care? EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation. Sounds like a mouthful, doesn’t it? But really, it’s just a way of looking at how much cold hard cash your business makes from its core operations—before things like loans, tax bills, and the wear and tear on your equipment start muddying the waters. Basically, EBITDA tells potential buyers how much money the business generates from just doing its thing, which is why it’s often used in valuations. A higher EBITDA usually means a higher valuation, as it reflects the company's earning potential without extra financial baggage. For smaller businesses a valuation can be obtained using " Sellers Discretionary Earnings " - we'll not muddy the waters with this (separate blog on this), and will be happy to explain the difference if you want to speak with us. This can often favour smaller businesses. Step 1: Calculate EBITDA (Get to the Good Stuff) Let’s use our trusty Widget Co. as an example. To calculate EBITDA, we start with the net profit (£59,000 in Widget Co.’s case) and then add back the costs of interest, taxes, depreciation, and amortisation. Here’s how it works: 1. Start with net profit: £59,000 2. Interest: Let’s say Widget Co. is paying £3,000 in loan interest. 3. Taxes: Widget Co. paid £12,000 in taxes last year. 4. Depreciation and amortisation: Widget Co. has some equipment that’s slowly losing value (depreciation), and it costs £5,000 a year. Amortisation is like depreciation but for intangible assets (like patents), but let’s say Widget Co. doesn’t have any of those. Now, we add these costs back to the net profit to get EBITDA: EBITDA = £59,000 (net profit) + £3,000 (interest) + £12,000 (taxes) + £5,000 (depreciation) EBITDA = £79,000 Step 2: Why Buyers Love EBITDA (and why it can affect your valuation) Buyers love EBITDA because it gives them a clearer view of how much profit the business really makes from its operations. By stripping out things like interest (which depends on how the business is financed) and taxes (which can change based on legal structures), they get a sense of how the business performs at its core. When valuing a business using EBITDA, the same idea of “multiples” comes into play, much like with profit. Typically, small businesses might sell for between 3 to 5 times EBITDA, depending on the industry, growth potential, and other factors. Let’s take Widget Co.’s EBITDA of £79,000 and apply a multiple of, say, 4 (right in the middle again, for simplicity): £79,000 x 4 = £316,000 So, based on EBITDA, the value of Widget Co. could be £316,000. Step 3: Don’t Forget the Assets (they’re still important!) Just like before, we can’t forget the valuable assets Widget Co. owns—the industrial unit and other equipment. Those assets, valued at £265,000, need to be added to the EBITDA-based valuation. So, combine the two: £316,000 (EBITDA-based value) + £265,000 (assets) = £581,000 Now we have an even more detailed estimate of Widget Co.’s value: £581,000 based on EBITDA and its assets. Step 4: Which Method is Better—Profit or EBITDA? Both methods (using net profit or EBITDA) are widely used, but EBITDA is often seen as a more accurate reflection of a business’s true earning potential. It’s especially useful if Widget Co. has a lot of debt or high depreciation expenses that might skew the net profit downwards. However, smaller businesses might not always have loads of interest, depreciation, or other costs, so using net profit could still give a fairly accurate picture. Let’s Summarise: Widget Co.'s Value with EBITDA 1. EBITDA calculation: £79,000 2. EBITDA-based value: £316,000 (using a 4x multiple) 3. Add assets: £265,000 4. Total business value: £581,000 And there you go—another way to get an approximation of what Widget Co. might be worth. Now you can walk into those valuation meetings armed with EBITDA, net profit, and a solid understanding of how all the pieces fit together. You’ll sound like a business valuation pro! We're all about adding value to your business. Taking the time to get you and your business READY for sale. 80% of businesses that are listed for sale NEVER sell, we'll help you navigate that minefield too. Would you like to chat? Here's the link .
Locked Box vs Completion Accounts: A Small Business Owner’s Guide The Your Labrador Can Understand. So, you've decided to sell your business, and you’re working hard with the Junction 20 content to PREPARE your business and sell for more. Awesome. It’s your baby, your pride and joy. It's been a wild ride, from burning the midnight oil (and probably burning a few kitchen appliances) to celebrating that first sale that wasn’t to your mum. Now, you're on the brink of passing the baton, and suddenly you're hit with terms like "Locked Box" and "Completion Accounts." If you're scratching your head thinking, "Are these types of padlocks? Do I need a key for this?", don't worry. We're going to break it down for you, with a dash of humour to keep things light, and write it in a way a labrador will understand. Why? Because it annoys us that so many brokers and consultants use weighty text and terms in a bid to justify fees. What on Earth is a Locked Box? Let's start with the Locked Box mechanism, which - spoiler alert - doesn't involve actual padlocks, handcuffs or safes. Sorry to disappoint. So, keep your handcuffs for other things, moving swiftly along… The Locked Box is a financial system used in business sales. It's all about freezing the accounts of your business at a specific date (known as the "Locked Box Date"). Think of it like a financial time capsule: you decide on a date when the accounts are "locked," and after that, you, as the seller, agree not to take out or put in any sneaky last-minute transactions. Here’s a very relatable scenario: • Imagine you’re selling your local bakery (you’ve made a killing with those award-winning scones). • The buyer and you agree that on 31st March, you’ll lock the box. • From that point on, the buyer will treat the business as though it were already theirs. No sneaky spending, like ordering yourself a new industrial oven "on the house" after the agreed date. Everything is frozen, except for regular operational stuff like paying your staff or, in the bakery’s case, buying flour (because we can’t have a flour-less bakery). You, the seller, pocket the business’s profits up until 31st March. After that, anything the business makes or spends is the buyer's responsibility. Locked Box: Pros and Cons Pros: • Simplicity: The price is fixed, no surprises. • No ongoing haggling: Once that box is locked, there’s no need for you and the buyer to argue over receipts or sneaky post-sale adjustments. • Predictability: Both you and the buyer know what’s happening from the get-go. Cons: • Trust Issues: The buyer has to trust you haven’t drained the business’s coffers before locking the box. So, no cheeky bonuses or splurges on “business” trips to the Maldives. Completion Accounts: A Different Game Altogether Now let’s look at Completion Accounts, which are a little more “wait and see” in nature. If a Locked Box is like agreeing on the sale price today and walking away, Completion Accounts are more like selling a house where you promise to take care of the lawn and make sure the plumbing works before handing over the keys. It’s all about settling the sale after the fact, with a bit more back and forth. Here’s how it works: • You agree to sell the bakery on 31st March. • But instead of fixing the price, you and the buyer wait until after the sale to finalise the accounts. • On completion day, the buyer wants to see what’s really in the cupboards (financially speaking). They’ll go over the business’s assets, liabilities, cash flow, and debts like a financial detective. Based on this, they’ll adjust the final price. So, if you’ve mysteriously been stockpiling sugar mountains, they’ll adjust the price downward. Imagine this: After the sale, the buyer finds out you owe a flour supplier £5,000 (because who doesn’t need massive quantities of flour in a bakery?). They’ll subtract that from what they agreed to pay you. On the flip side, if there’s more cash in the till than expected, you might walk away with a bit extra. Completion Accounts: Pros and Cons Pros: • More flexibility: The price can be adjusted after sale, depending on how the business performs up to completion. • Fair for both sides: If your business did great leading up to the sale, you could get a higher price. Cons: • Complicated: You might have to go back and forth with the buyer over small financial details. Imagine explaining to them why the bakery needed a new industrial-grade coffee machine two days before the sale. • Time-consuming: Finalising the accounts post-sale can drag on, meaning it could be months before you know how much you’re actually getting. Which One Should You Choose? Now comes the golden question: should you go with the Locked Box or Completion Accounts? • If you're a no-nonsense type who likes certainty, go for the Locked Box. You can lock in a price, hand over the business, and sail off into the sunset knowing your sale price won’t change. You can plan that post-exit holiday without worrying about future financial wrangling. • If you're someone who enjoys a flexible approach (or perhaps you think your business might outperform expectations in the months leading up to the sale), then Completion Accounts might be for you. Just be prepared for a bit more post-sale paperwork and some potential price fluctuations. A Final Word of Advice (and a Cup of Tea) Whichever you choose, make sure you’ve got a solicitor to help you navigate the small print. This is vital. We provide guidance and help on how to PREPARE you and your business for sale, like most in the "advisory space", we're NOT legal experts. Selling a business is no small feat, but understanding these two mechanisms - Locked Box and Completion Accounts - can make the process smoother. And let’s face it, there’s nothing wrong with feeling like a financial wizard when you’ve grasped the difference between the two! So, take a deep breath, have a cuppa, and get ready to sell that business like the savvy entrepreneur you are! Would you like to discuss this further? Then let's have a chat.
Why Is My Business Not Selling? Are you wondering why your business isn't exactly the next big thing? Do you feel like you're selling artisanal ice to Eskimos? Fear not, dear entrepreneur! You’re not alone. Many small businesses find themselves in the same leaky boat, paddling frantically without going anywhere. Let’s dive into ten possible reasons your business might be floundering, and hopefully, we'll add a sprinkle of humour to lighten the load. First of all, you’re not alone, sadly. In the UK, 80% of businesses listed NEVER SELL. It’s not because they are bad businesses, it’s down to lack of preparation. Here’s some pointers to avoid being on the wrong side of that statistic. 1. Your Product is a Secret Your product is fantastic, but nobody knows about it. Are you running a business or a covert operation? If your marketing strategy involves whispering about your product in dark alleyways, it’s time to rethink. Shout it from the rooftops (or at least post it on social media)! Never assume because your amazing product is awesome to you that everyone else knows what it does. A potential buyer will be excited by a business with a solid, clear and exciting product range or offering. 2. Website Woes Your website looks like it was built in the '90s by a time traveller from the '80s. If your customers need a magnifying glass to read the text or a map to navigate, you’ve got a problem. Update your site and make it as user-friendly as an ATM. For a website LESS is MORE. As Donald Miller told us in that amazing book, “Building a Storybrand” – “If you CONFUSE, you LOSE”. A potential buyer WILL be put off with a business that’s not digital “savvy” – WORSE still, they will SEE this long before you know they exist. 3. Social Media Ghost Town Your social media presence is quieter than a library at midnight. If your last tweet was about the Y2K bug, it’s time to get with the times. Engage, post regularly, and remember: cat memes aren’t always a good idea. A potential buyer will not be jumping over hurdles to buy a business that is in the “Digital Dark Ages”. 4. Pricing Like a Picasso Your pricing strategy seems to follow the logic of modern art: nobody understands it. Are you charging too much or too little? Either way, your pricing should make sense to your customers and reflect the value they’re getting. Remember, you're selling products, not confusion. As well as pricing, a potential buyer will be looking at the systems and structure you have for monitoring profit and margins. A “finger in the air” pricing policy excites no one – in fact, it could lead to the wrong finger being in the air! 5. Customer Service? What’s That? Your customer service is as friendly as a grumpy cat on a Monday. If your response time to customer inquiries can be measured in geological epochs, it’s time to up your game. Be prompt, be polite, and maybe even add a smiley face or two. Do you have “barriers” that make it more difficult to do business with you than it should. 95% answer NO, funny thing, but 95% actually DO. Yes, even in 2024 some businesses are “Cash Only” – that sign should read “GO AWAY”. Every potential buyer will be doing a lot of digging here. Small businesses live or die, thrive or dive, based on Customer Service and Reviews. Good is no longer good enough. 6. Ignoring Feedback Your customers’ feedback is more valuable than gold-plated bitcoin. If you're treating it like spam mail, you’re missing out on insights that could turn things around. Listen to your customers; they might just have the secret sauce to your success. Expect a potential buyer to walk, or perhaps run, if you haven’t got a good feedback loop. We always suggest before selling, conduct a Net Promotor Score (NPS) – this is GOLD in the eyes of a buyer. 7. Branding Blunders Your branding is about as cohesive as a cat wearing a tuxedo. If your logo, colors, and messaging are all over the place, customers won’t know what to make of you. Create a consistent brand image that tells your story clearly. Branding is NOT just for the “big boys” – branding is for life, not just Christmas. This is what we call a “Hidden Objection” or a “Silent Objection”, it’s where a sub-conscious decision is made. The potential buyer doesn’t “feel right”, there’s something not exciting them, but they just can’t put their finger on it. A poor brand strategy is guaranteed to do that. 8. The Location Lottery Your business is located in the middle of nowhere. Unless you’re selling desert survival kits to stranded travellers, you might want to reconsider your location. Be where your customers are, not where the tumbleweeds roam. Be seen, be visible, be noisy, be consistent, be relevant, be everywhere. Today, EVERY business can and SHOULD be visible. Today, though, a good location can be a prime slot on Google. A strong position on Amazon. A busy store on ETSY. A busy, vibrant website. 9. The Valuation Expectation Your business has a value, every business does. There are many ways to improve and INCREASE that value, however, your Jam Doughnut business with a turnover of £45,000 and a net profit of £8000 is unlikely to be worth £1m. Sure, the broker may tell you that as they take an UPFRONT fee. We’ll guide you on THREE valuations. 1) What the business is worth today. 2) What the business could be worth with a bit of effort. 3) What the business could be worth with some serious effort and planning. The choice is yours. A business is worth what a genuine buyer is willing to pay for it. An excited, motivated and impressed buyer will pay a premium. 10. The Desirability Factor Your business is your baby, and no one likes to hear their baby is ugly. However, by creating DESIRABILITY and showing a potential buyer what your baby is REALLY capable of, well, now we’re off to the races. FEW businesses do this. We call this GROWTH POTENTIAL, and it is good. This isn’t a flight of fantasy, or figures pulled from La La Land, Growth Potential focusses on real opportunities and used a module called T.A.M, S.AM. and S.O.M to illustrate market and growth opportunities. 99% of buyers will acquire a business with a view to increasing and improving that business, give them the blueprint for that. So, there you have it! If your business isn’t selling, one (or more) of these culprits might be to blame. Remember, Rome wasn’t built in a day, and neither is a successful business. Tweak, adjust, and most importantly, keep your sense of humour. After all, entrepreneurship is the ultimate rollercoaster – just hang on tight and enjoy the ride! Would you like a no obligation, no waffle, no cons, no gimmicks, no CHARGE business evaluation and valuation? Drop us a message and we'll make that happen.
Can You Sell A Self Employed Business? The Mighty Micro Business: Small but Mighty in Value Why Small Is The NEW Big Running a micro business in the UK is like being the captain of a tiny, one-person ship navigating the vast, unpredictable seas of entrepreneurship. You might not have a crew, but that doesn't mean your ship isn't valuable—or saleable. In fact, your micro business could be the hidden treasure a savvy buyer is searching for. So, grab a cuppa, sit back, and let’s dive into the world of mighty micro businesses. YOUR mighty micro business. In the UK it is estimated that there are 5.6 million businesses – wow, that’s huge. Of those 5.6m, 74%, yes nearly THREE QUARTERS, 4.1m are NON EMPLOYING. Yet, bizarrely, the vast majority of M&A professionals, brokers, sales agents and consultants are NOT interested in helping micro business owners prepare their businesses for sale. Why? They will tell you micro businesses, or “one person businesses” are NOT sellable. They are, let’s be clear on that. That’s their code for “we don’t get a big enough fee”. You’ll have to navigate and PLAN your course towards exit, and that can take a few years, it is, however, worth it. Working in your business will earn you a living, selling your business could earn you a fortune. You may not be looking to exit now, and that’s great. Planning, preparing and building a business that is sellable will be a wise investment for future years. The longer the plan, the better the return. You also want to see a RETURN for those many years of hard work. The Unsung Hero: The One-Person Band Picture this: you’re the CEO, CFO, CMO, MD, FD, COO, and every other letter of the alphabet. You handle everything from marketing and sales to invoicing and customer service. You wear so many hats, you could open a millinery shop on the side. But guess what? That versatility and resilience can make your micro business a gem. Sure, you might not have the luxury of a fancy office or a team of minions - I mean, employees - to delegate tasks to, but your business is streamlined, efficient, and oh-so-personal. Every touchpoint with your customers has that unique "you" flair. And that’s precisely what makes your micro business valuable. Buyers are looking for that kind of authenticity and direct connection with customers. It's like finding a unicorn in the middle of a crowded horse race. When you “systemise” and structure your business to deliver all that with consistency and quality, now we’re off to the races, and in pole position too. Value Beyond Size: Why Small is the New Big 1. Nimbleness: While big corporations are like gigantic cruise ships needing miles to change direction, your micro business is a sleek speedboat, agile and quick to pivot. When market trends shift, you’re already there with the next big thing. Potential buyers love this flexibility. 2. Personal Touch: Your business isn’t just a number on a spreadsheet; it’s a story. Customers buy into that story. They know they get the personal touch, and that relationship is pure gold. Buyers see this as a major asset because, in a world dominated by faceless giants, a personal connection is rare and precious. In a transition phase, with the right business systems and processes, that is easily transferrable to a new, passionate owner. Think of your business as a very powerful desktop computer. All that hardware and power stays, all you’re doing when selling and transferring to another owner is “switching the motherboard” 3. Lower Overheads: No need to worry about office politics, water cooler gossip, or who's been nicking the last biscuit. Your costs are minimal, and your profit margins can be surprisingly healthy. Savvy buyers recognise this efficiency. Then we add a secret ingredient called “Growth Potential”, and the force is strong with that one. Selling Your Business: The Art of Making It Irresistible So, how do you sell this one-person marvel? Here’s the playbook: 1. Polish Your Financials: Even if numbers make you want to hide under your duvet, it’s time to get cozy with them. Clean, clear financial statements showing consistent revenue and growth will make potential buyers swoon. Think of it as giving your business a nice scrub up and a fresh set of clothes. 2. Growth Potential: You have spent many years running your business the way YOU want. There will, almost certainly, be MANY areas that offered growth opportunities that you didn’t want to embrace, that’s okay, in fact, that’s GOOD. This is what we call Growth Potential, you showing a prospective buyer the full potential of what THEIR new business could REALLY achieve – now we have ourselves a ball game. 3. Highlight Your Differentiator: What makes your business stand out? Whether it’s your unique products, stellar customer service, or that secret sauce only you know, make sure buyers understand what sets you apart from the crowd. Why do customers use you, what makes your business really stand out in a crowded and NOISY marketplace? 4. Create a Transition Plan: Buyers might be worried about taking over a one-person operation. Ease their minds with a solid transition plan. Offer training sessions, document your processes, and be available for consultations post-sale. It’s like handing over a well-oiled machine instead of a pile of random parts. 5. Market the Lifestyle: You’re not just selling a business; you’re selling a way of life. Highlight the freedom, flexibility, and satisfaction of running a micro business. It's not just about the money—it's about the joy of being your own boss and the potential for future growth. This is where the systems and processes are KEY. A well oiled, desirable, well structured business has real value. A chaotic, non systemised business is nothing more than a job and is highly unlikely to sell. 6. Outsource: A well structured micro business will outsource many tasks such as admin, finance and accounts, and perhaps marketing. This leaves them more time to devote to working on their core tasks that deliver PROFIT. 80% of businesses listed for sale NEVER SELL. Not because they are not good businesses, but because they don’t action the points we’re outlining. The Bottom Line: Small Can Be Huge Remember, just because your business is small doesn’t mean it’s not valuable. In fact, your micro business’s simplicity, flexibility, and personal touch can make it incredibly attractive to the right buyer. So, polish up that gem, tell your story, and get ready to pass the baton. Who knows? Your little ship might just sail into a big, lucrative horizon. And if all else fails, there's always that millinery shop idea. After all, you’ve got enough hats to start with! What’s next? Drop me a message and we’ll have a “Mighty Micro” chat around your exit goals and ambitions. I’ll leave you with a number of key ideas to really help you move forward, and there’s no charge for that.
I am considering selling my small business when is the right time to sell? When is the right time to sell my business? That’s a question I get asked a lot. There are many factors that will influence the “best time”, assuming of course that “the best time” is actually code for GETTING MORE FOR MY BUSINESS. If you don’t want to read the whole article, then the short answer is simple. The best time to sell your business to maximise the sale price is when both YOU and the BUSINESS are READY , and not a second before. Many assume it’s when the economy is booming. That may be a factor for some, however, a business that is chaotic will sell for LESS in boom times than a business that is well structured selling in a recession. Deciding when to sell your small or MICRO business is a critical decision that can significantly impact the financial return and the future of the business. Here are key factors to consider when determining the right time to sell your business: 1. Business Performance Sell when the business is performing well: Buyers are more likely to pay a premium for a business that is profitable, has steady revenue growth, and shows strong future potential. A solid track record of financial performance makes the business more attractive. Our advice here is to complete our “Growth Potential” module and create the “Desirability” that is guaranteed to get a potential buyer excited. 2. Market Conditions Favourable market conditions: Economic conditions, industry trends, and market demand play a crucial role. Selling during an economic boom or when your industry is thriving can result in a higher valuation. Conversely, selling during a downturn can mean a lower sale price. However, as previously mentioned, a chaotic business will NOT sell for a premium even if the economy is growing faster than a tomato plant in a Saudi Greenhouse. 3. Personal Readiness Personal goals and readiness: Your personal situation is a major factor. Consider your long-term goals, health, retirement plans, and whether you feel ready to move on. Burnout can affect the performance and growth potential of the business. Many business owners fail to take account of the “lifestyle expenses” the business affords them. When planning your exit, the day after the sale your monthly income from that business is likely to be £0.00. Have you factored that into your plans and exit price? Surprisingly, many don’t. 4. Strategic Timing Strategic business milestones: Selling after achieving significant milestones (e.g., launching a new product, expanding into new markets) can enhance the value of your business. Buyers may be willing to pay more for a business that has reached important growth stages. This is where our “Growth Potential” module is invaluable as it helps you plan, forecast and share the full growth POTENTIAL of your business. This is what we refer to as “Desirability”, and it’s a HUGE factor on the price you’ll get for your business. 5. Financial Planning Financial considerations: Understand the tax implications of selling your business. Consulting with financial advisors and tax professionals can help you plan the sale in a way that maximises your financial benefit and minimises tax liabilities. Be aware that what mitigates your tax liability may affect the buyers tax position, so make sure the financial and tax structure is discussed and agreed as early in the negotiation as possible. 6. Succession Planning Succession or transition planning: Having a solid plan for transitioning the business to new ownership can make your business more appealing to buyers. This includes having key management in place who can continue running the business smoothly. Micro businesses and solopreneurs would rely heavily on a combination of systems and processes and key outsource partners. 7. Competitive Landscape Competitive advantage: If your business has a strong competitive position, such as unique products, loyal customers, or proprietary technology, it may be an opportune time to sell. Buyers look for businesses with strong differentiators in the market. We also refer to this as “Pricing Authority”. When you are the expert in a particular field, you’ll never be the “cheapest”. 8. Buyer Demand Buyer interest: High buyer interest in your industry or type of business can create a seller’s market, where you can negotiate better terms and a higher price. 9. Valuation Trends Business valuation trends: Track how businesses similar to yours are being valued and sold. If valuations are high, it might be a good time to sell to capitalise on favourable market conditions. Remember though, the business must be well structured and READY to sell to maximise this opportunity. Consider your “Growth Potential” and “Desirability” too, if there are several businesses for sale in your industry, make sure you are REALLY standing out from the crowd. 10. Emotional Detachment Emotional readiness: Emotional attachment to your business can cloud judgment. Ensuring that you are emotionally prepared to sell and move on can make the process smoother and decisions more rational. One element we ALWAYS suggest you adopt is the “STOP FIGURE” – the absolute lowest figure that you’ll accept. During Due Diligence DO NOT allow the buyer to negotiate below that figure. In the cool light of day, with no emotional drivers, you agreed this was the LOWEST acceptable figure – do not let emotion drive you below that. This is a HUGE factor in business owner REGRET after exiting. Summary The right time to sell your business is a blend of personal readiness, strong business performance, favourable market conditions, creating growth potential, showing DESIRABILITY, and strategic planning. We’ll guide you through all this for FREE , you don’t need to be a client. 80% of businesses listed for sale NEVER SELL. That’s tens of thousands of business owners that have invested a significant portion of their LIFE into a business and never get that “final pay day” – we don’t think that’s right – DO YOU? Would you like to have an initial chat? Message us here .
Exiting your business and PREPARING for it is a serious subject. Here's a "lighter touch" on what we see as the top 20 factors that limit both your opportunities to sell and selling price you ultimately receive. Junction 20 was created to improve your DESIRABILITY , making your business look more attractive in the eyes of a potential buyer. Too many businesses look at the past and present when selling, they forget the POSSIBLE , and that's what your buyer is looking for. Here's our top twenty, enjoy...and the good news - Junction 20 makes all this, and more, go away. These are the OBVIOUS factors that limit a sale, what about the less obvious ones? Have a call with us and we'll highlight what the less obvious factors are, and how to build the DESIRABILITY that a buyer wants. Dodgy Financials: If your financial records look like a spider web spun by a caffeinated arachnid, potential buyers might hesitate. No one wants to untangle a financial web – not even Spider-Man. Outdated Technology: If your computers are so old they still run on steam, it might be time for an upgrade. Buyers don't want to invest in a business that's still sending faxes and playing Snake on their Nokia 3310. One-Man Band: If you're the heart, soul, and janitor of your business, it can be a red flag. Buyers might wonder if they're purchasing a business or adopting a very demanding pet. Cramped Quarters: If your office is so small that turning around requires a 27-point turn, it's not exactly a selling point. A bigger space could mean more room for success, or at least for a game of office chair racing. Mysterious Market Presence: If your business is about as well-known as a B-list celebrity's pet iguana, you might have a branding issue. Buyers want to invest in something with a reputation, not a business that could be mistaken for a secret government experiment. Legal Limbo: If your business is wading through a swamp of legal issues, it's not exactly a selling point. No one wants to buy a business and inherit a legal saga – it's like adopting a kitten and discovering it comes with a team of lawyers. Employee Revolving Door: If your staff turnover is so high that you've considered installing a revolving door, it's a problem. A stable team is an asset; constant new faces can make your business look like a reality TV show with a confusing casting strategy. Social Media Ghost Town: If your social media presence is so quiet that a tumbleweed wouldn't even bother rolling through, it's time to spice things up. Buyers want a business that knows how to tweet, not one that sends messages by carrier pigeon. Dinosaur Marketing: If your marketing strategy involves carrier pigeons, smoke signals, and messages in a bottle, you might be behind the times. Buyers want a business that can navigate the digital jungle, not one stuck in the marketing Stone Age. “We’ve always done it that way”... oh dear! Uninspiring Branding: If your logo looks like it was designed by a sleep-deprived squirrel with a crayon, using Donald Duck Paint Studio 5, it's not helping your cause. Buyers want a business that looks good on paper – not one that looks like a toddler's art project. Inventory Graveyard: If your shelves are packed with products that have been collecting dust since the '90s, it's not an ideal sales pitch. Buyers want inventory with a future, not items that could be considered artifacts in an archaeological dig. Tech Time Warp: If your website is so ancient it asks users for their ICQ number, it's time for an update. Buyers want to purchase a business, not a digital time capsule. Maybe you’ve “we’d” all over your website too, YUCK! We did this, we do that, we have these awards, we have been established since 1972. Get the picture? Invisible Online Reviews: If your online reviews are rarer than a unicorn sighting, it might be time to encourage some feedback. Buyers want to know your business is loved, not that it's a secret society with a "hush-hush" policy. Tax Troubles: If the taxman is knocking at your door more often than the pizza delivery guy, it's a problem. Buyers want a clean financial slate, not a business that sees HMRC as a pen pal. Unicorn Expenses: If your expense reports look more like a fantasy novel than a balance sheet, it's time to rein it in. Buyers want to invest in a business, not finance a quest to find the mythical land of Endless Budgets. Neglected Customer Service: If your customer service is slower than a snail with a hangover, it's not winning any awards. Buyers want happy customers, not a hotline that plays elevator music for hours on end. The Silent Sales Person: If your follow up process, or lack of it, resembles a silent movie from the 20's (1920's that is), then you’re leaving thousands on the table...your competitors table that is. Be less Laurel and more Hardy. No Plan B: If your business plan is about as solid as a Jenga tower missing a few blocks, it's risky. Buyers want to invest in a business with contingency plans, not one that collapses with the first unexpected breeze. Social Media Oversharing: If your business's social media strategy involves oversharing to the point where followers know your dog's middle name, it might be time to dial it back. Buyers want professionalism, not a daily soap opera in 280 characters or less. Bad Blood with Competition: If your business rivalry is more intense than a Shakespearean tragedy, it's not a selling point. Buyers want a business that competes, not one that's starring in a never-ending feud episode of a reality TV show.
For many business owners 2024 will be a year of optimism and progression. For others, perhaps a time to focus on exiting their business. In a follow up to our previous blog on " Push and Pull Factors " we're highlighting that the factors DRIVING you towards an exit could potentially be the very same factors that will PREVENT it, or at least limit your exit possibilities. Before considering offering your business for sale, remember that 80% of businesses listed never sell ... there's a reason for that. It's what many business brokers refrain from highlighting as they seek an upfront fee. In the dynamic landscape of entrepreneurship, the decision to exit or sell a business is a complex and often emotionally charged process for business owners. It may come as a surprise, the very factors that propel business owners toward the exit door are often the same issues that contribute to the devaluation of their businesses. In this article, we will delve into the symbiotic relationship between exit drivers and business devaluation , exploring real-world examples to shed light on the intricate dance that unfolds in the world of business ownership. Market Changes and Adaptability: Businesses are constantly navigating the ebb and flow of market dynamics, more so today than ever. The world is moving at the fastest pace it ever has, and the slowest it ever will . The inability to adapt to changing market conditions is a prominent factor driving business owners to consider an exit strategy. For instance, consider a traditional brick-and-mortar furniture retailer that failed to embrace e-commerce trends. As consumer preferences shifted towards online shopping, the furniture retailers revenues dwindled, prompting the owner to contemplate an exit. Simultaneously, the business's resistance to change contributed to its declining value. Technological Obsolescence: In today's fast-paced technological landscape, businesses must stay ahead of the curve to remain competitive. Failure to adopt or invest in emerging technologies can quickly render a business obsolete. Kodak serves as a poignant example. Despite being a pioneer in the photography industry, Kodak's reluctance to embrace digital photography led to a decline in its market share and, eventually, bankruptcy. The same technological inertia that drove Kodak towards an exit also devalued the company as investors lost faith in its ability to stay relevant. Leadership Challenges: The strength of leadership within a business is often a pivotal factor in its success or failure. Issues such as poor management, internal conflicts, or the lack of a succession plan can drive business owners to seek an exit strategy. A classic example is the case of Uber, where a series of leadership controversies, including allegations of workplace misconduct and the absence of a clear leadership succession plan, contributed to the departure of its founder and CEO. The ensuing turmoil impacted the company's valuation negatively. Financial Mismanagement: Sound financial management is the bedrock of a thriving business. When businesses face financial challenges, owners may seek an exit to mitigate personal losses. Enron, once considered a powerhouse in the energy sector, collapsed due to financial mismanagement and accounting fraud. As the financial scandal unfolded, Enron's value plummeted, and stakeholders scrambled to salvage what remained. The same financial mismanagement that led to Enron's downfall concurrently eroded its market value. Erosion of Customer Trust: Customer trust is a precious commodity that, once lost, is challenging to regain. Businesses facing scandals, ethical dilemmas, or consistent product/service failures may witness a mass exodus of customers. In the case of Volkswagen, the emissions scandal in 2015 severely damaged the automaker's reputation. While the company faced legal repercussions, its market value also suffered as consumers and investors alike lost faith in the brand. In today's Social Media world where every element of our business is under the microscope a hard earned reputation over many decades can be tarnished, or even destroyed, in as many minutes. Conclusion: The intricate dance between exit drivers and business devaluation underscores the interconnected nature of business decisions and outcomes. Recognising these interdependencies is crucial for entrepreneurs and business leaders seeking to fortify the foundations of their enterprises. By proactively addressing challenges and embracing change, business owners can not only avert the need for an exit strategy but also enhance the long-term value and resilience of their businesses in the ever-evolving marketplace. The Junction Twenty programme was created to allow business owners to PREPARE themselves and their business for a profitable exit. It's NOT designed for quick exits or distressed sales. Let us show you HOW this works, we're confident you'll be a little more than impressed. Let's have an initial chat ?
TAM, SAM and SOM are your three best friends when it comes to growing, scaling and exiting your business. This allows you to look at your total marketing opportunities, perhaps in a way you have NEVER done before. We are often asked; "Can you explain, in simple terms, what is referred to with TAM, SAM and SOM?" - Okay here goes... TAM, SAM, and SOM are acronyms often used in business and marketing to help companies understand the size and potential of a market for their products or services. Let me explain each one in simple terms: TAM (Total Addressable Market): TAM represents the total or overall market opportunity for a specific product or service. It's the maximum potential revenue a company could generate if it captured 100% of the market, assuming there were no limitations or restrictions. Think of TAM as the entire pie; it includes everyone who could potentially buy what you're offering, regardless of whether they currently do or not. It will be a BIG pie, it can however be a very tasty pie. SAM (Serviceable Available Market): SAM is a smaller subset of TAM, and for many this is where the real growth opportunities are. Remember, when you're planning an exit a potential buyer is going to be excited by potential growth opportunities - this is where the growth potential lives and breathes. You may not want to expand, however you want to share the POTENTIAL with a prospective buyer. It represents the portion of the total market that a company can realistically serve or target with its products or services. SAM considers factors like geography, customer segments, and other constraints that limit a company's reach. Think of it as the slice of the pie that you can actually reach and serve effectively. It's still a big tasty pie though... SOM (Serviceable Obtainable Market): SOM is an even smaller portion of the market compared to SAM. It represents the share of the market that a company can realistically capture or obtain. This is often referred to as the "low hanging fruit". Without expanding into new markets or areas, a focus on SOM can quickly return an impressive growth rate. Businesses looking to exit should focus on their SOM immediately. What opportunities are being missed? SOM takes into account the competition, marketing strategies, and the company's capabilities. Think of it as the slice of the pie that you can realistically grab and make your own. This is the tasty part of the pie because it's already on YOUR plate... just waiting to be eaten! Summarised TAM, SAM and SOM In summary, TAM is the entire market opportunity, SAM is the part of the market you can realistically serve, and SOM is the portion of the market you can realistically capture. These concepts help businesses focus their efforts and resources on the most achievable and profitable segments of the market. This is essential for business owners looking to improve prior to an exit. In reality, these improvements would be planned and implemented for a longer term exit. Can you explain further and give some examples of TAM, SAM and SOM Okay - Let's dive deeper into these concepts and provide some examples for better understanding. Total Addressable Market (TAM): Definition: TAM is the total, hypothetical market for a product or service. It represents the broadest view of the market size, assuming there are no constraints, and every potential customer is included. Example: Imagine a company that produces virtual reality gaming headsets. Their TAM would include every person on the planet who might be interested in gaming, regardless of whether they currently own a headset or not. So, the TAM would be billions of people worldwide. Phew, that's a lot of pie, even for me! Serviceable Available Market (SAM): Definition: SAM is a subset of TAM. It narrows down the potential market by considering factors like geographic location, demographics, and other limitations that affect the company's reach. Example: Continuing with the VR headset company, their SAM might be limited to, let's say, the United Kingdom. This is because they might not have the resources to market and distribute their product globally or European wide at the moment. So, their SAM would be the gaming enthusiasts in the UK. Nice pie, still plenty of it though. Serviceable Obtainable Market (SOM): Definition: SOM is an even smaller portion of the market that a company realistically expects to capture. It takes into account competition, marketing strategies, and the company's capabilities. Example: For the VR headset company, their SOM might be a percentage of the SAM they can reasonably expect to convert into customers. Let's say they believe they can capture 5% of the UK market within the next two years. That 5% would be their SOM. Can you see where their growth potential comes from? In this example: TAM is the entire global gaming market. SAM is the portion of the market within the UK SOM is the specific percentage of the UK market (5%) the company plans to capture. Understanding these concepts helps companies make realistic business plans, allocate resources efficiently, and set achievable goals. It also guides their marketing and product development efforts toward the most promising segments of the market. What else is relevant to TAM, SAM and SOM Several other factors and considerations are relevant to TAM, SAM, and SOM analysis: Market Segmentation: It's crucial to divide the market into segments based on various criteria like demographics, geography, behaviour, or psychographics. Each segment may have a different TAM, SAM, and SOM, and companies need to tailor their strategies accordingly. Market Trends: Monitoring industry trends, emerging technologies, and shifts in consumer behaviour can impact the TAM, SAM, and SOM over time. Staying up-to-date is essential for adapting strategies. Competitive Analysis: Understanding the competitive landscape is vital. Knowing who your competitors are, their market share, and their strategies can help refine your estimates of SAM and SOM. Market Growth: Assessing the overall growth rate of the market is important. A growing market can offer more opportunities for capturing a larger SOM over time. Barriers to Entry: Consider factors that might limit or facilitate entry into the market, such as regulatory requirements, intellectual property, distribution channels, or capital requirements. Customer Needs and Preferences: Understanding what customers want and how they make purchasing decisions can help target the right segments within SAM and SOM effectively. Marketing and Sales Channels: Determine the most effective channels for reaching your target audience within SAM and SOM. This may include online advertising, social media, partnerships, or physical retail locations. Resource Allocation: Companies should allocate resources (budget, personnel, time) based on the size and potential of their SOM. A larger SOM might justify a larger marketing budget or more extensive sales efforts. Market Entry Strategy: Companies need to develop a clear strategy for entering and expanding within their SOM. This could involve pricing strategies, product differentiation, or geographic expansion plans. Tracking and Measurement: Continuously track and measure progress against the SOM. Adjust strategies as needed based on performance and market changes. Risk Assessment: Consider potential risks and uncertainties that could affect your ability to capture the expected SOM, and have contingency plans in place. Customer Feedback and Iteration: Gathering feedback from customers within your SOM can help refine products or services and improve your market position. In essence, TAM, SAM, and SOM are not static figures but dynamic concepts that require ongoing analysis and adaptation as market conditions evolve. Successful businesses regularly review and adjust their strategies to maximise their share of the market. Phew, and that is TAM, SAM and SOM - your three new besties. This is just one of the twenty modules that Junction Twenty uses to help you plan, prepare and enjoy and successful exit and get MORE for your business. Would you like to know more - let's have a chat ...
What Is Meant by “Exit without Exiting”? This article was written to challenge those considering selling their business with this one question. “What are you REALLY selling?” What are you REALLY exiting? Is it the business you have built up over many years, or is it the current pain, hassle, stress, and anxiety that your baby has created? If it’s the latter, allow me to be BLUNT – you’re exiting for the WRONG reasons, yet for you, at the moment, they appear to be the right reasons. This is why 75% of business owners go on to REGRET selling their business. When the pain is gone, so has your BUSINESS. Let’s look at this in a bit more detail now… This Blog post is relevant to two others that you should also read; “ Why Do So Many Business Owners Regret Selling ?” and “ Push and Pull Factors When Selling A Business – WHAT ARE THEY? ” Selling your business is a huge emotional decision , way more than starting the business ever was. This is potentially a LIFE time of investment, or a significant portion of your life. While every business should have an exit path defined, that exit path must be clear and not based on PUSH factors. Factors and influences within the business that are PUSHING you out of YOUR business and perhaps into a sale that will lead to regret later. When we refer to “ Exit WITHOUT Exiting ”, this is where you work on those PUSH factors and eliminate them. Get your business to run efficiently and effectively without you. In other words, prepare your business for sale so you don’t need to. When you reach that stage, you know you’re exiting for the RIGHT reasons. How is it possible that so many businesses allow themselves to be “Pushed” away from their business? We see a lot of businesses that are NOT in a good place. Business is tough; therefore, life is tough. There’s a lot of overwhelm, stress, and hassle. You could argue that’s just “part of business”; however, it’s been going on for many years and perhaps influenced further by family or financial pressures. Look at our PUSH factors blog; there may be some, or many, you can relate to. List them – ACT on them. You just want the pain to stop . You want the hassle to go away, and the grass always looks greener on the other side of the fence. It rarely is, long-term anyway. The business is then sold, which almost certainly means below the POTENTIAL value. It’s not been a distressed sale; however, you could say more of a “de-stressed sale”. The valuation of the business will have been affected as you were perhaps heavily involved in many of the day to day decisions, the business structure may not have been robust, and maybe the accounts and recent profits were not that exciting. Great reason TO SELL the business, right? WRONG . It’s a great reason to IMPROVE . Prepare your business for sale; whether you do or not is almost irrelevant. Exiting WITHOUT Exiting. This will not suit every business owner; however, it’s an option to consider before committing to a decision that could lead to regret. This process is summarised as follows: Remind yourself why you went into business in the first place. What was the dream? What was the vision? What is the reality currently? Has that dream become a bit faded? 1. Who allowed that to happen? 2. What are the PUSH factors that are driving you from your business? List these and carefully analyse the root cause. Then ask yourself, "If those root causes were not there, how good would my life be?” 3. What is your involvement with the business currently? Make sure all these tasks are listed and reviewed. 4. What is the profitability of the business currently, and forecast? Let’s dive a bit deeper into “Exiting a business WITHOUT Exiting.” "Exiting a business without exiting or selling" is a concept that suggests finding a way to step away from the day-to-day operations or responsibilities of your business without completely selling or divesting ownership of the business. It often involves delegating tasks, restructuring the business model, recruiting management roles, or implementing changes that allow the business owner to reduce their involvement while maintaining ownership. This requires a significant mindset shift as many business owners will use the phrases “that won’t work for my business” or “I tried that before”. EVERY business in EVERY industry can be structured to run without you; it’s YOUR decision. Henry Ford once said, “Whether you think you can or whether you think you can’t – you’re right.” This concept is commonly associated with entrepreneurs or business owners who want to reduce their active role in the company but still retain ownership and potentially benefit from its continued growth or success. There are a few strategies that might be used to achieve this: 1. Delegation: The owner might delegate more responsibilities to capable managers or executives, allowing them to handle the operational aspects of the business while the owner takes a more hands-off approach. 2. Restructuring: The business could be restructured in a way that allows the owner to step away from certain functions or divisions while retaining control over others. 3. Hiring Key Personnel: Bringing in skilled individuals to manage different aspects of the business can enable the owner to reduce their direct involvement. 4. Implementing Systems and Processes: Creating effective systems and processes can help the business run smoothly with less day-to-day intervention from the owner. 5. Transitioning to an Advisory Role: The owner might shift to an advisory role or consulting role, providing guidance and strategic input without being directly involved in daily operations. 6. Remote or Part-Time Management: Depending on the nature of the business, the owner might explore the option of managing the business remotely or on a part-time basis. 7. Automating Tasks: Implementing technology and automation can reduce the need for constant oversight and intervention. The goal of exiting a business without selling is often to achieve a better work-life balance, explore new ventures, or focus on other interests while still maintaining ownership and potentially benefiting from the business's ongoing success. It's important to carefully plan and execute such a transition to ensure the business thrives even with reduced owner involvement. There are, of course, financial implications. You may have to recruit at Director or Senior Manager level. How will that impact the business? Of course, that impact is likely POSITIVE as your well-structured and systemised business is now running like a Swiss Watch. You may now be saying, “That’ll never work in my business”, and you are of course, 100% right , as Henry kindly pointed out in the quote above… Let’s remind ourselves of the PUSH Factors that could be driving you toward a business exit. Junction Twenty exists to identify these, then work towards resolving them. This is NOT easy; it requires a change of thinking and a LOT of commitment. In the context of selling a business, "push factors" refer to the reasons or motivations behind the decision to sell the business. These factors can be either internal or external and significantly influence the owner's decision to sell. Understanding these factors is crucial for the seller and potential buyers to evaluate the business's current situation and prospects. Push Factors: These are the internal reasons that "push" the business owner to consider selling the business. Common push factors include: Personal reasons: The owner may be nearing retirement age, experiencing health issues, or facing other personal circumstances that make them want to exit the business. Burnout or fatigue: The owner might feel overwhelmed by the demands of running the business and want to step away. Diverging interests : The owner's passions or goals may have shifted away from the business, leading them to seek new opportunities. Financial challenges: The business may be struggling financially, and the owner may decide to sell to avoid further losses or debt. Here are 20 more examples of common push factors that might lead a business owner to consider selling their business. How many can you relate to? 1. Owner's retirement or desire to step back from day-to-day operations. 2. Health issues or personal/family circumstances require more time and attention. 3. Lack of passion or interest in the industry or business model. 4. Business stagnation or lack of growth opportunities. 5. Overwhelming workload and burnout. 6. Financial difficulties, including declining profits or increasing debts. 7. Difficulty in adapting to market changes or technological advancements. 8. Disagreements or conflicts among business partners or stakeholders. 9. Inability to keep up with industry regulations and compliance requirements. 10. Strong competition and the challenge of maintaining market share. 11. Shift in market demand away from the business's products or services. 12. Ineffective or outdated marketing and sales strategies. 13. Challenges in finding and retaining skilled employees or management. 14. Declining customer loyalty and satisfaction. 15. Changing customer preferences and needs that the business can't address. 16. Unfavourable economic conditions affecting the business's performance. 17. Loss of key suppliers or disruptions in the supply chain. 18. Environmental or social factors impacting the business's reputation or operations. 19. Inadequate resources or capital to support business growth. 20. Realisation that the business model is no longer viable or sustainable. These push factors can vary significantly from one business to another, and sometimes multiple factors might contribute to the decision to sell. Not all businesses are sold for negative reasons; some owners may also choose to sell when the business is performing well to capitalise on its success or explore new opportunities. The purpose of this blog, and this part of the Junction Twenty programme is to ensure you’re exiting for the right reasons. We’re often asked what are examples of more personal push factors Push factors may influence a business owner's decision to sell their business prematurely. These factors are often deeply rooted in the owner's personal life, aspirations, and circumstances. Here are some more personal push factor examples: 1. Retirement: The owner wants to retire and enjoy a more relaxed lifestyle. 2. Health Issues: The owner's health problems make it challenging to continue running the business effectively. 3. Family Obligations: The owner needs to prioritise family responsibilities or caregiving duties. 4. Career Change: The owner seeks a new career path or wants to explore other business opportunities. 5. Time Commitment: The owner desires more leisure time and less stress from managing the business. 6. Burnout: The owner is mentally and emotionally exhausted from working the business. 7. Personal Interests: The owner wishes to pursue personal passions or hobbies. 8. Relocation: The owner plans to move to a different city or country, making business management difficult. Read our Blog post on “ Push and PULL Factors When Exiting Your Business .” Have a chat with us, there's no obligation and it's 100% Confidential. Use the form here to contact us. Maximising the RETURN of your LIFE investment is what we're all about.
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