Selling a business isn't really something that we discuss in everyday conversation but today, it's deemed more acceptable than ever. I recently discussed 'how to sell a business' on my LBC show because I noticed that it's a subject not many people completely understand but would like to learn more about.
I've been building businesses for 30 years. That's my passion. During those 30 years I've learnt that when one door closes, another opens.
When I was thinking about selling my first recruitment business, Alexander Mann, everyone said to me "why James!? It's one of the biggest recruitment companies in the world - it's your livelihood!"
Of course, it wasn't an easy decision and everyone I spoke to was right - the business was my baby but if I carried on, the rest of my working life would be predictable.
The first time I went to get Alexander Mann valued, I was walking on air. I though this is going to be great, I've built an amazing business and I'm going to get a great return. How naïve I was! The broker told me there's no way my business was ready for sale - It had no real structure or long term strategy. The whole business was built around me. I didn't have a strong management team and I had no infrastructure - my bookkeeper was my mate! I learnt my lesson that day and it took me five years to build the business into a viable, saleable business.
I walked away from that meeting with an exceptionally long to do list, rather than an offer to buy. It's always assumed that being an entrepreneur and owning your own business means you have money. In reality, as with most entrepreneurs, your cash is all tied up in the business and anything I was making at that time was going straight back into building it. The truth is, the first time I actually had wealth was when I first sold Alexander Mann. I often reflect on this and wonder where I would be if I had carried on. When I sold, the business had achieved £130million in revenue. Upon reflection, if I had continued, the business would probably be hitting £600million in profits but instead of financial success, I chose the idea of freedom.
The inner entrepreneur in me found the fear of the unknown more exciting - I wanted to know what was next and I was eager to build something from scratch all over again.
Selling a business is a difficult process and one which not many people openly discuss so I've developed a few 'key ingredients' you'll need if it's something you've been thinking about:
Strong management
The one thing all buyers will be looking for is a strong management team. Your business needs to have real infrastructure. This means having great governance - show that you have an effective, efficient board - a clear strategy and understanding of where the business is going, reliable finance and administrative operations and a defined market plan. I meet many entrepreneurs whose business would fall apart without them because they are the business. When you're looking to sell, this can't be the case.
When a business is all about one person, that's what I call a lifestyle business - it's a boutique, not a business. Think of it like a game of Jenga - nobody is going to buy something that will fall apart without the strongest block in place.
Brand identity
Brand establishment is essential in the selling process. Your brand is the most openly accessible analysis your buyer has to tap into so of course it's going to hold a high level of importance.
The power of the brand is second to none and if people recognise it, you'll gain more interest and have a better chance of getting the best deal. For example, one of the businesses I invested in, Gemini Search, were named #8 in The Sunday Times 100 Best Small Companies to Work For this year and this kind of endorsement has meant their brand identity has gone from strength to strength. If they were looking to sell, they would look very attractive to potential buyers right now.
Remember that before you even think about selling you need to have an established brand identity which sets you apart from the competition and is strong enough to carry itself through a business restructure.
'Scaleability'
Finally, and most importantly. Ask yourself, is the business scaleable? This is the most important component. The buyer needs to have a chance to make money - why else do you think they're looking? If your future growth is limited then this makes the business very difficult to sell. Show your potential buyer just how scaleable the business could be and share any future predictions that will excite them.
Be sure to think carefully about these three aspects when you're looking to sell and don't just take the first offer you get. You built this business from the ground up - exit with the confidence that it's in good hands and will continue to be something you're proud of.