At some point after owning and running your business for 10, 20 or more years you will consider selling. As you think about whether you do or don’t want to sell there will be lots of questions, both business and personal. There will be uncertainty and stress. That’s to be expected, as most of you will only own and sell one business.
On some days you will be totally convinced that selling up is the best thing to do.
On others you won’t be so sure. You might think "I actually enjoy being here most of the time, and there are a few deals in the pipeline – maybe I can hang in for another two years?"
If you have thought of selling and had similar questions or uncertainties then we can help. Our quality advice and practical answers will ensure that you don’t make a costly mistake with a knee-jerk reaction or emotional decision.
Rushed decisions to try and quickly sell an unprepared business always cost the owner precious time and money.
Our Business Owner’s Diagnostic (B.O.D.) will help you answer a lot of the personal and business questions like:
It will help you understand everything that’s involved in a sale process, how it will impact you personally and if there are other options.
From there you are much better placed to make the right decision on this once-in-a-lifetime opportunity.
After a very successful professional career Michael Kent just couldn’t resist any longer. He had to get into his own small business. He considered buying one but in the end he started his own. He sent his first invoice in 2012. By late 2016 he topped the $1m turnover mark – from the outside it would have looked like he was flying. But the personal stresses were mounting. Now that he had successfully started Michael wondered about what next? Was it time to sell? Should I keep going as I am or take it to another level? Michael engaged Kerr Capital and after completing the Business Owner Diagnostic (B.O.D.) decided to defer selling. He realised he could make the business more valuable and instead refocused on the most profitable areas of the business and started to plan for a sale in 3 - 5 years.
"You pick up on snippets of information on how to value and assess your business – but it’s all anecdotal – I thought it was about time to get some expert external advice."
Michael Kent founded Slate Accountsin 2012.
Slate seriously loves business and provides bookkeeping and related services that deliver clarity and efficiencies for its diverse small business client base. Their approach is modern, informed and fresh.
Michael was working overtime to drive the topline revenue growth, which is vital in the early days of a new business. But like a lot owners there came a point when Michael hit a lull in his energy and passion. Taking its place were questions like “Am I focussing on the right areas of the business and are they adding to the potential sale value?” and "How long before I start to see some more money in my pocket?"
While Michael remained committed to the business he needed answers. His family wanted to be sure that all the effort and sacrifice was worth it.
While he picked up bits of advice from business colleagues along the way it felt disjointed. What troubled him most was that he was using this ad-hoc advice to make important decisions. While well-intentioned it was confusing and counterproductive, and lacked a thorough understanding of Michael’s personal and business aspirations.
"It’s crazy that a business wouldn’t think at this level at least every 5 years."
We undertook the B.O.D. and a few things quickly became apparent.
The analysis started with an evaluation of the historical business performance at a ‘whole of business’ level. From there and based on further internal work by Michael we were able to identify 4 different business units, each with different products serving different market segments.
Michael had always seen potential in each of the segments and thought that by having a diversified business it would be more valuable. But when the numbers came in however he could see that a couple of the business units were really draining the overall business. He now had the analysis to back up the decision to streamline his day to day focus. While growing topline revenue had been vital in the start-up years now it had to be about focussing on profit.
"When looking for advice I figured a broker would be just after a sale so the advice would be skewed..."
It was time to ‘mothball’ two of the units and focus on the other 2 for at least the next few years. So he had really been ‘flying blind’ and now realised that there was a big gap between what the business would probably sell for and what he thought it should be worth.
With the financial analysis completed we then were able to have a much more intensive discussion about the different options and what Michael really wanted to do. This stage involved a lot of soul searching and family discussions. Together we discussed all the options e.g. selling, growing faster by buying another business or selling a share to an investor or bigger company.
"I thought you understanding what was going on with both the business and me personally – because they are so connected – was really helpful."
But anyway we looked at these different options Michael knew they would only be short term fixes and that he would feel like he hadn’t finished the job he started. He had built a really great team, a quality client base and a considerable amount of potentially valuable infrastructure in the form of systems and processes. In the end it became clear that Michael had to stick with his original objective - to organically build a business that he owned, where he had control and that would produce a significant financial upside when the time was right to sell.
Armed with an objective and independent assessment of all the options for the business and a structured plan it made it far easier for the family to ‘buy-in’ to his vision for the business. This significantly reduced the personal stresses and gave him a clear head and the confidence to keep investing in the business.
Michael summed it up his thoughts on Kerr Capital’s B.O.D.
"The breakthrough in clarity released the shackles and I could exactly where to invest my time, money and energy. That was a great relief but really in the longer term the payback will be far higher and will come in the form of a more profitable business and a higher sale value, if I ever decided to sell."
James Murphy was a successful café entrepreneur. Out of the blue and while running 2 successful café sites he (and his wife) were offered the once-in-a-lifetime opportunity to live and work in the USA. It ticked a lot of boxes personally. Acting on instinct he quickly got the businesses listed for sale. But this hasty attempt failed, wasting precious time and putting their US plans in serious doubt. James contacted Kerr Capital and asked us to help him work through an analysis of his options and create a plan that would work in the remaining time.
"At the core of the diagnostic is an honest open chat with no expectation of anything down the track. It’s about what you as the owner want..."
James kicked off his hospitality career with a coffee cart at The University of Melbourne. This business was developed successfully incorporating an innovative cause based marketing approach to differentiate the business and underpin its financial viability. Later sold it marked the beginnings of a more diverse, community focussed hospitality group which encompasses retail café sites, community building consulting and business mentoring.
Having reacted, rather than thinking through his options, James rushed to market to sell one of his 2 businesses, figuring he could keep the other and let existing management run it while he was away. Not long into the hastily planned sale process he realised that it wasn’t going to work and that it would be a race to the bottom. After the business broker handling the sale got little interest James knew the next conversation was going to be along the lines of "the market is tough, how about we reduce the price". Faced with the prospect of leaving Australia without selling the business or losing out financially he started to wonder about different options and how they would help or hinder his plans to relocate to the USA.
All the while James had to continue to run the businesses. The day to day operational commitment absorbed a lot of his time leaving him short when it came to thinking about a major decision like this. While there was a temptation to just keep making decisions to avoid uncertainty, after all that was what he did day to day, he also knew that he had to get the next one right. The potential consequences of another bad decision were very high - personally and financially. He needed some expert external advice and turned to Kerr Capital.
We took James through our Business Owner Diagnostic (B.O.D.) and undertook financial analysis of the combined business and looked at profitability and potential at an individual site level. We looked at ways to make it easier for buyers to understand and buy the business he wanted to sell. This included putting together a cohesive story that emphasised what a great business opportunity it was. We also developed strategies to help James overcome the potential downsides and inevitable questions about why this was such a quick sale process.
Once completed we were able to provide James with an assessment of potential sale value, of the individual sites as well as the combined business, and recommendations on the best way to get the sale away in the short timeframe available.
With this independent analysis we discussed the full range of options which by then ranged from keeping both and running them under management to selling the entire business. Through this process, supported by the findings of the B.O.D., James’s could more easily discuss the options with his wife.
"But there is some much value in having someone that you can talk to. It can be really hard trying to do that with a life partner and your family or whatever, because you don’t have all the answers and it’s hard for them to really understand the daily up’s and down’s."
In the end James decided to sell 1 of the 2 sites at the value we had agreed made it worthwhile. He was confident enough in the end to undertook the sale process himself. The sale was achieved within the very tight timeframe (dictated by his impending move to the US) and without buyers in the sale process feeling like there was a bargain to be had, just because the seller was relocating.
James best summarised the result of the work we did together.
"I reckon once I felt set about what I was going to do, I was off and away. The commitment to the plan was there and it was a game of patience to see it through."
With his track record of building successful businesses the decision he ended up making was much harder. He felt a weight of well-meaning expectations from others close to him to capitalise on future opportunities by “scaling up and getting bigger”. The discussions held as part of the B.O.D. enabled James to comfortable in giving himself the permission to chase another dream - a once in a lifetime opportunity to live in the US.
The payback for James was two-fold. At a personal level B.O.D. delivered James clarity about what he needed to do.
At a financial level getting the sale completed was a big windfall. It also ensured that he could take up the opportunity to live in the US. If the sale hadn’t gone ahead it would really have made this difficult.
James acknowledged that "While you can put it down to superior planning the guts of it was much more fundamental. The excellent sale result was achieved by shifting my thinking towards what a great opportunity my business was for buyer. Up to then all I could think about were my issues e.g. how my imminent move to the USA was going to get in the way of a sale. Kerr Capital really skilfully re-focused my thinking".
The B.O.D. costs $2,500 + GST. For that you get the following:
We have designed B.O.D. with a single purpose in mind – to help owners make best decision before they rush in and commit to selling.
The sale of any business – micro, small or big – is always more complex, time consuming and emotionally draining than owners, and those close to them, could ever imagine. If you want proof find some other owners who have been through a sale process and ask them!
B.O.D. is about answering your questions and arming you with all the information you need to make the best decision you can.
As we have been doing this for over 15 years our advice will be expert, up to date, practical and easy to understand.
If a sale is the best thing for you in most cases we are going to refer you to other quality business brokers who are experienced in your industry. Sometimes we will recommend that you undertake the sale yourself. So the advice we provide will be independent.
Because the ‘free’ advice you get from some business brokers or other business sale professionals isn’t independent and will have a catch or be much more costly in the long run.
To understand why you need to know that business brokers only earn their money when your business sells.
You need to know that the more businesses business brokers have for sale the more chances they have of making a sale – and any sale will do.
Often their ‘free’ advice on selling your business is only designed to get you to list your business with them and to get it on the market as soon as possible.
So while initially it might sound attractive i.e. to only pay them money when (and if?) the business sells there are real downsides for you.
Two of the major downsides to think about are:
To avoid these downsides you have the option to pay for some expert, independent advice before committing to selling or taking any other critical decision like deciding to sell half your business.
This is what B.O.D. is about.
When you’ve started to think about selling we understand that it's new territory for most owners. When you start to look or to ask around you’ll find there’s a lot of advice out there. But how do you know what’s good and what’s bad? Who can you trust? It can be confusing. There can be a temptation to jump at anything from someone who sounds half reasonable and knows a little more than you about selling and valuing businesses than you do.
We’ve already talked about the downside of ‘free’ advice.
So how else might you easily spend a few thousand dollars and how does it stack up against investing in B.O.D.?
Most of you will only ever sell one business. The financial (dollars) and personal cost (time and health) of making a bad decision will be very hard to recover from.
B.O.D. is an investment that will ensure you make the best decision, at a stressful and emotional time, when considering the sale of your business. It will help you ensure that when you do invest in advertising or business exit planning that you make the most of that significant investment.