You Want How Much

By Brian Holt

Based on more than a dozen years experience as Managing Director of two small businesses, ten years as a business broker, and as a private investor, the author has developed a unique process to guide business owners who want to prepare their company for sale or to get it ready for investment to achieve further growth.

Refined through face to face consultation this concise book shows the owner how to develop an action plan that will help him or her to achieve their personal and business goals.

There’s practical advice and case studies to illustrate how to make a business attractive to potential buyers and investors/lenders.

The reader is also encouraged to look at their business from the point of view of a prospective acquirer, investor or lender, so they know how best to address their concerns and so maximise their chances of success.

The Insider’s advice given here will repay the cost of the book many times over.

• Language: English
• Publisher: Brian Holt
• Release date: Aug 27, 2013
• ISBN: 9781301412075

Brian Holt

I have a Masters degree in Chemistry, and a Post Graduate qualification in Management. I held a couple of technical management posts at Unilever plc before being appointed Development Manager at a subsidiary of Norcros plc.My first MD position was at Data-Label Ltd where I achieved 20% per annum compound sales growth whilst increasing net profit from 10% to 12%; doubling the net profit per employeeOver a 9 year period I managed that company through two changes of ownership, and along the way learned a lot about the do’s and don’ts of post acquisition strategy.I then spent 4 years as MD of Anglia Labels Sales Ltd before starting my own consultancy business in 2001, providing clients across a number of industries with hands-on help to improve business performance. In 2004 I bought Aconsulting, a Business Brokerage which I’ve run ever since.For a number of years I’ve invested successfully in both established companies and start-ups.The fact that I’ve been married twice proved that I’m an optimist. Between us Jo-ann and I have four children, ten grandchildren, two dogs, a rabbit, and assorted tropical and cold water fish.We’re both PADI advanced scuba divers, though these days we spend most of our free time walking; most recently across moorland and along coastal paths.

Book preview

Preface

In business it’s not where you start it’s where you finish

The managers at Warren Buffett’s investment company Berkshire Hathaway evaluate stocks to invest in in exactly the same way they would if the owners offered to sell them the entire company.

The purpose of this book is to provide practical, experience based advice to two groups of business owners who at first sight may seem to have different objectives; those who are planning to sell their business and those looking for investment to grow their business.

This latter group will, or at least should be, planning to add value to their company with the ultimate aim of realising that value. Those seeking equity investment need to demonstrate maximum value so as to get the investment they need whilst granting the minimum shareholding to the investor(s).

The advice for both groups is therefore much the same but with different emphasis and different timescales. So let’s look briefly at a situation:

There are around 600,000 businesses in the UK with a turnover in the range £250,000 to £5,000,000. Many will be subsidiaries of larger companies, including overseas companies and PLCs but most will be privately owned

If we take a conservative view that there are in excess of 300,000 privately owned Limited Companies and Partnerships, and of these between 30,000 and 50,000 will be owned by people in the age range where they will be looking forward to retirement. Add to this the younger people who want to exit their current business to pursue new and more challenging business opportunities.

Studies show that less than a third of business owners make any serious effort to prepare their business for sale, which means that many will not achieve the value they aspire to when the time comes to exit. The harsh truth is that less than half of all business owners will ever sell their business and of those that do, less than half will achieve a price that meets their expectation.

It seems perverse that people who put blood sweat and tears into growing a business miss out on realising the full value at exit.

Of course selling a business isn’t the only option; some company owners will have developed offerings that could be franchised, giving them the chance to vastly increase their wealth whilst helping others to own businesses of their own.

Others may feel they’ve taken their business as far as they can and recognise the need for an equity partner to help them take the business to the next level.

But the vast majority of owners will want, at some point, to sell their business. In the UK alone there are more than 30,000 business owners who at any moment in time need expert guidance to prepare their company for sale if they are to realise the full potential of the business they own.

Owners who offer their business for sale are ultimately asking the buyer to invest in the company. It follows that the actions that make a business ready for sale are the same as those that make the company investment ready, and so the advice is equally of value to any owner who plans to seek investment for growth.

In recent years, and in particular since the credit crunch in 2008, it has become increasingly difficult to obtain bank lending. Whilst to a large degree this has been a result of banks rebuilding their own balance sheets, it’s equally true that many business people have failed to realise that the game has changed.

Both in my capacity as an associate of a business finance brokerage and as a private investor I’ve seen hundreds of business plans. The vast majority, particularly from start-ups and early stage business are hopelessly inadequate.

Without a well written and well presented business plan you’re unlikely to attract either a loan (be it from a bank or from crowd funding) or equity investment. Those with money to lend are approached by hundreds of companies and so will only invest in businesses that present a clear, concise vision of future growth.

Most company owners are familiar with the term Exit Strategy, the idea that at some point in time they will want to sell the company. In fact there are many options open to a business owner; a few will want to be carried out feet first, some will want to hand the business on to their children, whilst others will want to pass control in one form or another to their employees, and some will recognise that they have the potential to franchise the business and so carry on in ownership of a much changed business.

You owe it to yourself to maximise the value of your business, and because most of the actions that will strengthen your company and add value to it remain constant whatever your long term goals it’s my belief that you should have a business plan that keeps as many options open as possible.

Nothing will change unless you take action, but as your actions take effect your own wishes and the opportunities that become available to you and your business will change, so it makes sense to have an option strategy rather than a more limiting exit strategy.

Set out below in black and white are the main options available to a business owner. Within these there are more subtle shades of grey, but for now let’s consider the major potentials.

For the sake of simplicity I’ve written the book along the lines of a model that I’ve used successfully to help a number of owners to prepare for sale, but almost all the actions I suggest are of equal value whatever your future plans.

How will it all work?

I’ve tried to make this book as concise as possible because I know from personal experience that when you’re running a small or medium size company there are never enough hours in the day. I also know that it can be difficult to believe what you read in a book or to see how it might apply to your situation. So set out here is a case study describing the development of a real live company, to illustrate how even the smallest company can build value into their business.

A young man decided that he wanted to become a plumber. He went to the local college and did the plumbing course. He came out as a competent plumber, and started to ask friends and family if they could give him any work. A few could, and he turned up in his not-so-new white van. He did an adequate job, got paid, and on the basis that he was OK got a few referrals to more work. At weekends he typed up the invoices and posted them.

Meanwhile on the other side of town was another young man who did the same course. He asked friends and family if they have any work for him, but when he turned up to do a job he arrived in a liveried van and wearing a tee shirt and fleece that had his company name and logo embroidered on them.

He carried a vacuum cleaner in his van and left every job freshly cleaned. He asked the householder to sign off his work sheet and left them a couple of business cards, one to keep, the other to pass to a friend or neighbour.

Each night his girlfriend typed up the invoice and put the customers’ details on their database.

The business was going OK but he had free time, so he enrolled on a gas fitter course and a course that qualified him to do basic domestic electrical work. With these new skills he re-branded himself as a heating and plumbing engineer.

He had leaflets printed and with the help of a friend he hand delivered them to those parts of town where there’s a high proportion of home owners. He joined the local Chamber of Commerce and the Federation of Small Businesses. He went to all their network meetings wearing his smart uniform, put his leaflets on their information table and handed his business card to everyone who showed any interest in what he did.

Over time he became known across the town and surrounding villages, and eventually got to that point we all recognise as the big one, when the only way to grow his business was to take on his first employee. He had kept in touch with the other people who were on the courses he had done, and there was one he’d always seen as having the same values as himself, but who was employed by a local company rather than working for himself. He made him an offer and was delighted when it was accepted.

He explained to his new employee how everything in the company worked, provided the van and work wear. Whilst he had every confidence that he had made the right choice he took the time to phone some of the customers to confirm they were happy with every aspect of the work his new employee had done.

Fast forward a few years. He now employed a dozen fully qualified heating engineers, All had been inducted into the way his business works. Inevitably there were some mistakes on the way and he had to make some difficult decisions, but he now has a team who all work the way he wants. He pays them