Newsletter February2024

Insights from our interactions last month

This winter has been punctuated by storms but, so far (there could well be a late icy sting in the tail) it has been wet and mild. Interestingly the last 2 months have mirrored the season with some intense flurries of activity followed by little or no activity. The good news is that now that we have left the New Year well behind there is increased activity in the market. We have one business close to completion and another has just agreed Heads of Terms. This indicates buyers are active and ready to take on.?

Tip of the month

Selling a business involves various considerations, and assessing its readiness for sale is a crucial step. Here are some key steps to help you evaluate if your business is fit to sell:

In short look at the first check is does your business deliver the 2 C’s?

1????????? Cashflow – does your business deliver positive, profit generating and growing cashflow?

2??????? Continuity- when the current owners exit will the business continue to flourish? Most notably is there the management and staff capability in place that will remain with the business and continue to operate it successfully.

If the answer is yes then here is a more comprehensive list of considerations.

Financial Health:

Review your financial statements, including profit and loss, balance sheets, and cash flow statements. Potential buyers will closely examine your financial performance.

Ensure that your financial records are accurate, up-to-date, and well-documented. You will need 3- 5 years official accounts in place. ?Your accountant will be an important figure if you sell your business.

Profitability:

Demonstrate consistent and sustainable profitability. Businesses with a strong track record of making profits are generally more attractive to buyers. Profit is key driver of the value of your business.?

Management and Team:

Having a strong team and second tier management in place is crucial for most buyers. They will want the business to operate as normal once the current owners have exited.?

Ensure you have a stable and skilled workforce in place. Good employee relations and low staff turnover are positive indicators for potential buyers.?

Customer Base:

A diversified and loyal customer base is an asset. If your business relies heavily on a small number of clients, it may be perceived as risky.?

Operational Efficiency:

Streamline your operations to make the business more efficient and less dependent on the owner's day-to-day involvement. A well-documented and standardised operation is likely to be more attractive to potential buyers.?

Legal and Compliance:

Ensure that your business complies with all legal requirements. This includes licenses, permits, contracts, and adherence to industry regulations. Resolve any outstanding legal issues.

Review all contracts and agreements, including leases, supplier contracts, and customer agreements. Ensure they are transferable and that there are no problematic clauses.

Ensure all shareholders are in agreement and support the sale

If applicable, protect and document your intellectual property (patents, trademarks, copyrights). Having a solid IP portfolio adds value to your business.

Technology and Systems:

Make sure your business is up-to-date with technology. Modern systems and processes can enhance efficiency and make your business more appealing to buyers.?

Market Position:

Assess your market position and competitive advantage. Highlight what sets your business apart from competitors.?

Exit Strategy:

Develop a clear exit strategy and be prepared to articulate your reasons for selling. Buyers will want to understand your motivation and ensure a smooth transition.?

Valuation:

Have a realistic understanding of your business's value. Consider getting a professional business valuation to determine a fair market value.?

To avoid disappointment or failure to sell, it is vitally important that owners are realistic and don’t have inflated views on the value of their company that aren’t based on a valuation.?

Professional Advisors:

Engage with professionals such as business brokers, commercial lawyers and accountants who have experience in business sales. Their expertise can be invaluable throughout the process.?

As a business owner you are an expert in running your business, not selling it. By engaging the right professionals you? can keep your? hand on the tiller and to ensure your business continues to thrive during the sale process.?

Featured Business this month

DESIGNER AND SUPPLIER OF HOMEWARES AND LIFESTYLE GIFTS - This is an established designer and producer of homewares and lifestyle gifts. It operates from a leasehold premises and has an established loyal customer base.

It represents an exciting target for larger players in the market and potential new entrants. Buyers will benefit from established sales channels including specialist retailers and 2 websites, which despite general tough trading conditions are generating sales growth. This is a testament to the company's high quality creative content a great deal of which is its own intellectual property.

This is a rare opportunity in this sector.

??????????????? Annual Turnover of ￡431k.Forward order book exceeding ￡60k

??????????????? Adjusted EBITDA c￡100k

If you want to talk to me about any of the points mentioned please message me on Linkedin? https://www.dhirubhai.net/in/ruperttrevelyan/