Thinking About The Unthinkable
Over the past few months we have all been forced to face up to the reality, or at least the very real possibility, that we might not always be able to give 100% to the business. And it’s not just us business owners, any successful business will rely on the expertise and experience of a number of key personnel. So how do you protect your business from the potentially catastrophic consequences of losing the skills of a key player?
Insurance
I am sure most of you will be aware of key person insurance, it can be a really effective way to protect the business against the financial impact of death or terminal illness, but these are not the only scenarios in which you might lose a key member of staff.
Hopefully you will have your key staff on strong contracts that include reasonable notice periods and non-compete clauses, but it may be worth considering some balance. In addition to sanctions that discourage jumping ship, it might be appropriate to consider offering shares, profit share or some other scheme that encourages staff to feel invested in the continuing success of the business.
There are, of course, other ways that you as an employer can help insure yourself against losing staff to ill health. Offering benefits to key employees like health insurance, gym membership, and investing in staff welfare can often have a positive impact on the business that far outweighs the cost.
The football model
Football clubs and many other sports teams face this issue all the time. The physical nature of competing in top-level sports means the risk of injury is a very real challenge for clubs. An injury that keeps your key striker on the side-lines for six months can be catastrophic to a season.
The model they employ is to have depth in their squad so that they have a capable replacement to fill the vacant position and keep the team going. But that’s a very expensive model and many players are paid huge salaries simply to ‘warm the bench’.
However, it might be appropriate in your business given the right set of circumstances. In the same way that a midfielder may fill in at left back to help the team through a crisis, it may be possible to cross-train certain roles within your business which will provide at least temporary cover in an emergency.
Knowledge banks
One of the biggest challenges SME businesses face is how to replicate the knowledge and experience of the owner, or other key personnel. In one sense, there is no replacement for years at the coal face, learning and refining your skills. But if the business is too reliant on the skills and expertise of one individual it can be a precarious situation for all involved. If you think about it, this is a key step in ensuring the longevity of the business and influential in determining its value.
The best way to mitigate against this is to record as much knowledge as possible in a way that can be retained within the business. Think of it like creating a manual for the business, a how to guide that details how you would approach different situations, your five year plan for the business and any tricks, tips and techniques that are relevant to doing what you do.
Training and development programmes
Of course, all of this is not just useful for planning for the worst. It also has significant value in your general succession planning. There are plenty of stories of business owners leaving it too late to plan ahead and they end up working beyond the time they wanted to or worse, the business falters as the energy and drive behind it slowly declines. Investing in the next generation, training up apprentices and promoting from within are some ways that might be appropriate to think about.
Three steps forward
So how do you go about addressing this need, especially if it’s something you haven’t thought about before now?
Here is our suggestion of three steps you can take to begin addressing the issue:
- Audit – make a list, who are your key people and what unique skills, expertise or experience do they have? Don’t forget to include yourself!
- Assess Risk – it may be rather uncomfortable to think about, but ask yourself what the impact on the business would be if each of those people were unable to perform their job for an extended period of time? One month, six months, a year?
- Plan Ahead – prioritise those that pose the highest risk and start to think about what you can do to mitigate that risk.
This can be a difficult thing to do, it’s hard to think about and can be very challenging to be truly objective in these situations. Entrepreneurs Hub can help! Our expert advisors, each well-seasoned in running and growing businesses, are well placed to provide honest, third-party advice and guidance in this area.
Every business owner should review their succession planning on regular basis
Why not give us a call 0845 0678 678 for a no-obligation confidential chat or contact us here and we will call you
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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 around 12 to 18 months from initial preparation to completion, although some transactions may be quicker or take longer. The timeline depends on business readiness, buyer demand, deal complexity, due diligence and how quickly the legal terms can be agreed.
Preparing accurate financial information and organising key documents in advance can help reduce avoidable delays. Read our complete business sale timeline to understand 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, its future growth is clear and you are not under pressure to complete a sale. Buyers are generally more attracted to businesses with rising or stable profits, reliable financial information and credible opportunities for further growth.
Business owners are often in a stronger position 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 the owner
- There is a capable management team in place
- The owner has started preparing well in advance
Market conditions can also affect buyer appetite and valuation. Factors such as sector growth, access to finance and competition between buyers may support stronger deal activity, but preparation and business performance are usually more important than trying to identify a perfect month to sell.
Ultimately, the best time to sell is when both you and the business are ready, and the company can demonstrate sustainable performance and future value to potential buyers.
Use our Exit Readiness Tool to assess how prepared your business is, or read our guide on when to sell your business for further guidance.
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?
Selling a business quickly is possible, but speed shouldn’t come at the expense of value or deal security Read more…
What’s the best way to sell a business online?
Yes, you absolutely can sell a business online. Many platforms specialise in connecting business sellers with buyers. Read more…
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.