The business you establish is very personal to you. It stems from your interests, your qualifications, experience, knowledge and passion for a sector. However when it comes to selling your business, that personal connection and the legacy you want to leave from your business sale may have a big impact your chances of a quick exit.
Here we are going to explore the factors that influenced what proved to be our longest business sale to date.
First, some background
- The business came to market in 2014
- It took until 2021 to complete a sale, yes, that is 7 years
- We handled well over 600 unique enquiries
- We worked through 10 serious offers to buy
- Until we eventually found the buyer who satisfied our clients legacy requirements
S.M.A.R.T targets to this business sale
You’ve probably all been on a course at some point which talks about SMART targets in business. It usually relates to the sales department, but can also crop up in meeting customer needs or be internal within your finance or personnel department. SMART targets are – Specific, Measurable, Achievable, Realistic and Time-related.
Our clients who owned this chemical manufacturing business had a specific list of things that needed to be achieved with the sale of their business. Things which formed the legacy they wanted to leave behind. Things which were important to them personally, and to their business. When combined, they meant we were looking for a needle in a haystack.
Specific on location and people
When our clients had established their business decades previously, they located it in a somewhat deprived area. Whether it was their intention back then or not, they ended up bringing jobs to the people of that area who they watched flourish. Some moved on to bigger and better roles outside the company, but one particularly early employee remained throughout. This nurturing nature was important to our clients and it was one of the founding elements of their business, therefore customer and suppliers were also used to seeing it.
So the conditions of sale with any buyer would include that they would not relocate the business because of the following;
- Continued employment – the employee that they had taken on as a young apprentice many years ago was now 2nd in command, and his role was to be protected. He, due to family ties, could not relocate. Our clients wanted to replay his loyalty to the business by ensuring that his role was secure going forward with any new owner. Not something you can fully protect long term, but something as brokers we can make clear when we vet buyers, whilst also promoting the value of the employee to the business.
- At the time of sale our clients also owned the industrial unit the business operated from in their pension scheme and they wanted to know they had an ongoing tenant after sale. As a key part of their retirement income, securing a long term tennant was vital to the overall value of the sale to them.
- Wet and dry don’t mix – if we were potentially asking an existing business to merge into these premises, we had to be clear that the wet and dry chemical manufacturing processes simply don’t mix in the same environment. That was half our enquirers wiped out in one move.
Supplementing these very niche specifics were the usual business sale metrics such as value, acceptable price, conditions of handover and confidentiality.
Measurable by result
Were these targets measurable? Absolutely. As with all promotion of a business sale, at some point you have to test the water and put some details out. Then you wait to see what type of buyers show interest.
For this sale, that might meant lots of re-writes on the sales particulars over time to emphasise different points and to keep the annual financial accounts info up to date. The fact the business couldn’t be relocated, the fact that wet and dry manufacturing processes could not be brought together, that the 2nd in command needed to be retained, were all key details.
And so much of our time was spent with initial vetting conversations to work through this ‘checklist’ of requirements to find those who came closest.
Achievable in time
We could definitely achieve a sale for our client but the specifics attached to the sale would mean that time taken to find the buyer would be stretched. Little did we know at the time that Brexit (they bought and sold Chemicals in Europe) and a Pandemic would stretch that timeframe further!
Realistic?
So the big question is whether our clients were being realistic in the targets they set for the business sale, and the simple answer is ‘Yes’.
We knew from market research that the chemical sector was growing and evolving. Our client offered a niche product formulation, that was at the heart of fire protection. Changes in Europe also meant a lot of M&A activity from domestic and overseas buyers. There was also a willingness from trade to buy from within the UK where possible. We believed there would be a good level of interest in the sale from the outset. In metaphorical terms, it was a big haystack with lots of active buyers in it.
The factors our clients were identifying were important to them and to the legacy they wanted to leave behind for future generations. That reduced the number of active buyers who were going to meet our sale requirements drastically. So our haystack was just as big, but the active buyers had reduced to the proverbial needle.
Probably best demonstrated by the 9 serious offers from 600+ enquiries which were put forward through us that were patiently declined by our clients.
Time was the only thing to suffer
You will always find your perfect buyer if you can give yourself all the time in the world. It would have been remarkable if we had found that buyer immediately, given the specifics of this sale. Our eventual buyer was also gainfully employed in corporate management (with a background in Chemicals) for much of the time the business was on the market. It was only when that position ended that they began to look for their next opportunities.
So we needed a patient and understanding client who appreciated that time would have to give to provide what they wanted. And we had that. We also needed patience ourselves to continuously work through unsuitable enquiries and offers which didn’t quite offer everything. Until we found the one. The perfect match. When all the pieces of the puzzle finally came together at the same time.
Setting targets for a business sale is no different to any other target setting
This sale was a great example of how SMART targets apply just as much to business sales as any other area of business. If you put a heavy emphasis or restriction on one aspect, another will have to stretch. So had our client needed to sell super fast, perhaps because of a health issue, a specific target would have to stretch to compensate. For example, it might me that an acceptable sale price of 500k might stretch to accommodate offers from 400k-500k. There has to be a give and take within the deal if one aspect takes a higher priority.
It could take years to sell your business
Depending on the legacy you want to leave, it could take years to sell your business, or not. If you’d like to explore the factors which are important to your business sale and plan enough time to achieve them, please get in touch for a confidential discussion.
