6 ‘What Next’ Options Every Business Owner Must Consider
There comes a time in every business owner’s life when the answer to the question, what next, is not immediately obvious. For most of your business life you have made the decision, plunged in and taken the route you knew was right. But sooner or later age, or just other interests, start to cloud the path ahead.
It’s important to know, when this happens, that you have options and not to be forced down a route that you think is the only one open to you. If you are asking, what are my options for exiting my business, then Entrepreneurs Hub would be happy to work with you to assess what options are open to you. Here are six of the most common options every business owner should be aware of:
1. Just walk away
There are generally two reactions to this. Some will recoil in shock at the suggestion and others will resignedly shrug believing it to be the only regrettable option. In either case I would suggest, don’t be too hasty. It is worth considering, if for no other reason than to resolve in your mind that it is not a route you want to pursue and why – but then, in a very small number of cases, it might actually be the better option.
On the other hand, I recall a conversation I had with a client who had let his management team take over the business. Unfortunately, they had not done well, and it was in decline. The owner felt like he had no option but to just close it down. I was able to convince him to try, knowing that with a small investment the business was still saleable. In the end we were able to sell the business for significantly more than he would have got by just walking away.
2. Recruit or promote
This may initially seem like the ideal compromise. You get to step away a bit, but you retain an interest and you retain control. However, there are two very good reasons why this may not be as ideal as it sounds.
As one of my clients once told me… “I’d never stop thinking about the business, even when I am on holiday it would still be on my mind.” And as his wife keenly observed, “You have to know when you’ve won. You’ve built a great asset portfolio for your family, you don’t need to keep chasing the next deal.”
That said, of course, if you find the right person and have the right mind-set it can work well. But this is a rare combination indeed.
3. Family
The UK has a proud history of family succession in business, by reputation at least. The reality though is not so clear cut. Some research by the Family Institute some years ago found that only 30% of second-generation businesses survive, this falls to 12% in the third generation and only 4% in the fourth.
You may feel some pressure or desire to keep it in the family, but you need to be honest with yourself and each other. If they don’t have the same passion for the business as you deep down, it is unlikely to end well.
4. MBO/MBI
If you have a strong management team, this may seem like an attractive option – but a word of warning. If any acquirer of your business needs to borrow heavily to fund the acquisition it will be the lender that determines value.
5. Private Equity
This is a very interesting option with multiple benefits for companies who are successful. But it comes with very specific criteria and conditions that mean it is not suitable for all. Every Private Equity investor is looking for something a bit different depending on their aims and current portfolio, but they all share a common like for businesses with robust and dependable business models, with a clear growth opportunity and usually with profits of at least £500k plus.
The main sticking point with Private Equity for most business owners is the requirement for an extended involvement in the business. However, if you are in a position to commit to this then the rewards can be great.
6. Trade Sale
By far the most common and often most successful option for all parties. You sell the shares in your business to another business. It allows you to walk away with a fixed value and move on, and it allows the company to benefit from multiple synergies gained by combining the operation of two businesses.
Wherever you are at in your thinking, it would be great to speak with you in 2021. Entrepreneurs Hub will give you honest and practical advice – we don’t sell the sparkle, just the truth. Even if you think you have no options left, an independent third-party, like ourselves, can help you see alternatives you may not have considered.
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FAQs – Selling Your Company
How do I sell my business in the UK?
Selling a business in the UK typically involves preparing financial information, obtaining a valuation, identifying suitable buyers and negotiating the terms of a sale. Most owners work with an M&A adviser to manage the process confidentially, approach qualified buyers and maximise the value achieved.
At Entrepreneurs Hub, we talk about five key areas that make the difference between success and failure when selling your business. Read more…
What is my business worth?
A business is typically valued by applying a multiple to its sustainable profit, often EBITDA or adjusted net profit. The appropriate multiple depends on factors including growth, recurring revenue, customer concentration, management strength, owner dependency, market conditions and buyer demand.
Determining what your business is worth involves more than applying a simple formula. Use our Business Valuation Calculator to obtain an initial valuation range, or read our simple business valuation guide to understand the factors buyers consider.
How long does it take to sell a business?
Selling a business in the UK typically takes 12 to 18 months from initial preparation to completion, although the formal sale process itself may take around 6 to 9 months once the business is ready to go to market. The exact timeframe depends on factors such as how prepared the business is, buyer demand, the complexity of the transaction, due diligence and how quickly legal and commercial terms can be agreed. Preparing financial information, contracts and other key documents in advance can help reduce delays and make the sale process more efficient. Read our complete business sale timeline to see what happens at each stage.
When is the best time to sell a business?
The best time to sell a business is usually when it is performing strongly, has clear growth potential and you are not under pressure to complete a deal. Buyers are typically more attracted to businesses with stable or rising profits, reliable financial information and credible opportunities for future growth.
You may be in a stronger position to sell when:
- Revenue and profits are growing or consistently strong.
- Financial records are accurate and up to date.
- Future growth opportunities can be clearly demonstrated.
- The business is not overly dependent on you.
- An experienced management team is in place.
- You have prepared for the sale well in advance.
Market conditions can also influence buyer appetite and valuation. Sector growth, access to finance and competition between buyers may support stronger deal activity. However, the performance and sale-readiness of your business are usually more important than trying to identify the perfect month or year to sell.
Ultimately, the right time to sell is when both you and your business are ready, and the company can demonstrate sustainable performance, manageable risk and future value to potential buyers.
Use our Exit Readiness Assessment to assess how prepared your business is.
Do I need an adviser to sell my business?
You are not legally required to use an adviser to sell your business, but many owners appoint an experienced M&A adviser to help manage the process. An adviser can prepare the business for sale, identify and approach suitable buyers confidentially, coordinate negotiations and support the transaction through due diligence.
The right adviser can also help create competitive tension, protect your time and reduce the risk of avoidable mistakes. Read our guide to choosing the right business sale adviser to understand the different types of support available.
How do I prepare my business for sale?
Preparing a business for sale involves strengthening its financial performance, reducing risk and making sure it can operate successfully without heavy reliance on the owner. Buyers will also expect accurate financial records, clear contracts, organised documentation and evidence of future growth.
Preparation should ideally begin well before approaching the market, giving you time to address weaknesses that could affect value or delay the transaction. Use our Exit Readiness Tool to assess how prepared your business currently is.
How is confidentiality protected during a sale?
Confidentiality is protected through controlled information sharing, anonymised buyer approaches and non-disclosure agreements. Potential buyers usually receive limited information at the start of the process and must sign an NDA before commercially sensitive details are released.
Prospective buyers should be assessed before receiving further information, with documents shared gradually according to their level of interest and credibility. A well-managed process also allows the business owner to retain oversight of who is approached and what information is disclosed.
What documents do I need to sell my business?
The documents needed to sell a business commonly include financial accounts, management information, forecasts, customer and supplier contracts, employment records, tax information and evidence of intellectual property ownership.
Buyers may also request details of property, insurance, legal disputes, regulatory matters and company ownership. Organising this information before due diligence begins can reduce delays and help maintain buyer confidence. Our Business Sale Due Diligence Checklist explains the main information buyers are likely to request.
What’s the quickest way to sell a company?
The quickest route is usually a sale to a buyer who already knows your business, such as a competitor, a supplier or your management team, or to a buyer with funds ready. Even then, legal work and due diligence normally take two to three months. Speed usually costs money: with only one buyer at the table there is no competition on price. If timing matters, tell your adviser at the start so the process can be built around it.
Can I sell my business online?
You can list a business on an online marketplace, and for very small businesses this can work. For businesses with a value above around £2m, public listings carry risks: staff, customers and competitors may spot the sale, and the buyers who respond are rarely the best fit. A managed process that approaches selected buyers confidentially usually produces stronger offers and protects the business while it is for sale.
How can I increase the value of my business before selling?
You may be able to increase the value of your business by improving sustainable profits, developing recurring revenue and reducing reliance on individual customers or the owner. Buyers also value capable management teams, reliable financial reporting, scalable operations and clear opportunities for future growth.
The earlier you identify the factors affecting value, the more time you have to make meaningful improvements. Use our Business Valuation Calculator for an initial indication of value and our Exit Readiness Tool to identify areas that may need attention.