The fact of the matter is that it has always been a buyer’s market when it comes to selling your business. Although the continuing Brexit uncertainty may continue to delay potential investments into the market for a period, getting prepared for a business sale now still makes sense. As several commentators in the UK’s SME market have noted, “it may end up like business as usual, with only a few minor tweaks.”
As such, investor confidence may well regain strength depending on how the UK’s negotiations with the European Union turn out. Although some of the large scale government business sell-offs have been postponed, this is not truly representative of the SME business sale market currently and no yardstick should be set against these events. Nevertheless, a realistic approach to small and medium business sales should always be maintained. Even in the pre-Brexit environment, many business principals were surprised, if not shocked, when they were told that only 1 in 5 businesses placed on the market will eventually sell.
Should buyers get over their understandable trepidation with investment at the moment, given this telling statistic, it is clear that there must be a big difference between the number of sellers out there compared to buyers? As the business sale market normalises in the months ahead, sellers can still expect to face stiff competition to attract the right sort of buyers in the market.
Firstly, if you decide that it is the right time for you to sell your business, then – regardless of the underlying market conditions – you should take on board that it is far from certain that you will actually achieve a sale. You should, therefore, go into the process with the right expectations which include the possibility of it taking a long time to find a buyer or not even selling at all. It is also worth bearing in mind that an overly ambitious expectation of a seller is frequently the reason for a reasonable deal to fall through. After all, buyers can look elsewhere for another opportunity with ease and sellers rarely can.
There are two common issues with business sales expectations, including having an inflated expectation of a business when it comes to valuation. You need to ask yourself what your business, often lovingly built up from humble beginnings, is worth to a potential buyer – not to yourself. In most cases, a business is more valuable to its owner than it is to any potential buyer.
The second area that constitutes a common pitfall is having an exaggerated expectation of the number of offers you will receive once your business is put up for sale. To be clear, it is unlikely that any business owner will receive a plethora of offers to choose between. If you do, then that is certainly trend-bucking good news, but even so, you are likely to need expert advice to help you work your way through the various offers being made.
There are two key areas that can help with a company sale despite the difficulty that can reasonably be expected. The first is to prepare for the sale well in advance. The second is to appoint an advisor who can help you to navigate your way through the process.
Bear in mind that investors now have a good deal more choice. They have the ability to choose from a wide range of businesses in any sector of the economy. They can select between businesses which are on the market for sale and those which are off-market, too. By recognising that there is a lot of competition out there, you need to prepare to make your business as attractive as possible to potential buyers. Don’t simply assume there is little that you can do to improve the attractiveness of your business so start putting in the effort now.
As mentioned, getting expert guidance is the other key step to take. If there’s one area that will improve the chances of a business sale, then it is by appointing a trusted advisor to represent you. Not only will a professional sale advisory service augment the chances of a sale by around 30%, but it will also help you to negotiate the best terms possible for a sale once one is agreed in principle. Professional business sale advisors often have a proven method for contacting the right sorts of buyers in the sector you operate in and know how to market a business in the most effective ways.
However you think the latest economic news will impact on your business and its potential sale value, please feel free to speak to the independent experts before you reach any decisions.
First published June 2016. Updated April 2019.
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