Selling a business. Look, you’ve either found yourself at this page because you’re my friend and I invited you to follow it (and you’d look bad if you didn’t right?) or, because someone you know has shared the link in which case, this blog is most likely for you.
Friends? I won’t be offended if you stop reading right now. You’ve already clicked through. My stats are happy.*
*It’s not all about the stats.
(Well maybe it is a little bit).
I wanted to write an informative post about selling a small business. This supposes that you have a small business, and that you are thinking about selling it (or perhaps buying one), but this is a post about what I came up against selling mine, and things that you should know BEFORE you start the process. Oh, and how to value your business, and how to find the right buyer. And that you have to accept, some people who inquire will just be being nosey and want to see your books.
So you’re thinking about selling your business…
There are a myriad of reasons for selling a business, just as there are for setting one up in the first place. I will briefly tell you a little bit about how I found myself to be one half of Chez Bec, and then how it came that we sold the business.
My story of how I came to own a business…
Back in 2006 for many personal reasons, I started to trace my Family Tree. I’d left my job that I hated in HR, and had been setting up a jewellery business, whereupon we decided to try for a baby, the theory being if we hit any issues, at least we would know. And that I could have my career post kids rather than pre (still working out what I want to be when I grow up to be honest… But business ownership has made me certain it lies in working for myself… I don’t think I can go back to working for someone else now).
Anyway, I decided, as you do, to throw myself into tracing my family tree. This was in the days where Genes Reunited (an actual spin off of Friends Reunited) was quite new, and the census’s were only just being put online. Long story short, I got a match! And met my second cousin through my Dad’s Grandfather via the medium of the internet. Lovely Anna happened to mention her niece was launching a jewellery company, and put us in touch. And that was Rebecca Doyle… and Chez Bec was the company.
We met, we designed a collection (not bridal) and I became a stockist for her. I then had a baby, and along the way we became friends. Then she had two babies at the same time (always one to do things the hard way), and then I had another baby. All the time I still stocked her. The business was small for me at this stage, I just wanted ‘something’ that wasn’t just nappies and purees to give me some identity. It was still very much a part-time enterprise for me, but full time for Becks.
We’ll have to fast forward a little. Well established in the bridal industry already, Becks opened Isabella Grace in Tunbridge Wells (you’ve probably heard of them, they’ve won a lot of awards), and I was at that stage in life when the kids were at school and pre-school, and I needed to work again. And wanted to. Desperately.
And so it came to pass that I bought half of Chez Bec, taking over a lot of the day to day running, and making everything from my spare bedroom (spare as in I evicted my daughter from it and she then shared with her sister). It was an amazing couple of years. Business boomed, through both luck and hard work, and we had photo shoots featured in one of the biggest wedding blogs, and in the press. It was brilliant.
And then Mr R got a job opportunity that he couldn’t turn down. In Jersey. Now, I dragged my heels about moving (this I have written about before), but it all worked out brilliantly, and I love living here. However, a lot of the Chez Bec trade was last minute, especially in the summer months. I needed a next day delivery service that could deliver…. and Jersey post will only ever guarantee papers to be delivered next day (and that depends on weather, if it’s fog, nothing gets off the island). Added to that, every single item that I sold had to have VAT prepaid. Even though we were a UK registered company, because we were flat rate VAT, we couldn’t reclaim it. So we had a 20% hit on EVERY sale. Not to mention increased postal prices, with decreased levels of service and guarantee. It was not great.
Honestly, it had come to a point where the business needed a re-vamp and whatnot anyway, but the move really forced my hand. I couldn’t run it like I used to anymore. It wasn’t fair on anyone, including all our lovely stockists who likewise needed a reliable level of service. And so we came to the sad decision to sell.
Why are you selling your business?
The series of events that led to me selling my business might vary a lot from yours. But if you’re still reading, then you are probably a business owner, and, for whatever reason, you might not want to be anymore. It might be that you need a regular income (Lord knows, with self-employment comes a whole heap of uncertainty). It might be that it’s grown too big for you, and you don’t want it to be as full time as it is (remember, having a business that is part time is totally allowed!). It might be that your heart isn’t in it anymore. It might be that you’ve got to move. It might be that you need to take time off work. ALL THESE REASONS ARE TOTALLY VALID. You don’t have to justify it to me. Sometimes you just know the time has come to pass on the baton. But how on earth do you go about doing this? And how do you find a buyer? And more importantly, how much can you get for it? Because lifestyle business or not, you started this baby to make money. Lots of lovely money. You’ve poured in your heart and your soul and all the hours. You need to get something back.
Before you sell the business…
Valuing your business…
So here is the brutal news. Your business is only worth what someone else is willing to pay for it.
Your. Business. Is. Only. Worth. What. Someone. Else. Is. Willing. To. Pay. For. It.
It’s not an easy thing to swallow actually. Because you google ‘value my business’ and it tells you it’s worth 2 x turnover on some models. Or it might say 3 x annual profit. Sure. That is what it’s worth on paper. But it’s not what someone will pay for it.
Setting up a business is a risky thing, and you might think there is a premium involved for buying something that is already up and running, and profitable… not to mention all the time you’ve spent setting it up, all the hours you’ve worked on branding and press and PR.
What you need to decide is whether you are going to set a price. Are you going to set an ‘offers over’? A set price? Will you entertain a future profit share type sale? Or do you want a clean break and cold, hard, cash.
Only you can decide these things. But I would just say BE REALISTIC. And what it’s worth on paper, may be well under what you achieve. If you need to sell, then consider every offer, but don’t ever be afraid to say no, and likewise, don’t every be afraid to counter offer. It’s like buying a house. It’s a two way negotiation, but don’t just say a flat no to anything. Consider all offers.
So I’m good to go… where do I find me a buyer?
Finding a buyer is the hardest thing of all. Finding the right buyer, harder altogether. Rightly or wrongly, we care a lot who we sell our business to. There’s so much of a personal investment in it, that we can’t always just say yes.
There are several ways to find a buyer, but think carefully.
For example, if you put a general announcement on Facebook, you’d possibly upset existing customers – uncertainty, are you reliable still? What’s wrong with your business?
There are two people who might want to buy your business. First off, there are people looking to start their own from scratch, but who want to skip the really hard bit and jump straight in. Those emails that you get from randoms asking about your business and how you find suppliers etc… The ones you want to delete but keep? Reach out to them…
BUT, by far the most likely place your buyer lies, is in your competition.
The companies that you count as your major competition. That is where your buyer could well lie.
The other place is a company like yours, selling slightly different things that could seamlessly branch into doing what you do. They might lie there too.
Don’t wait for them to come to you. Phone them. Email them. Tell them you are selling. Be nice to them. Tell why you want them to buy. Why they would be a perfect fit (not just ease, but I tell you, there is something much easier selling to someone who already knows their way round a similar product). Be proactive.
But remember to get them to sign the NDA before sending out any sensitive information.
Remember that if they are the competition, they will want to see your books. Doesn’t mean they won’t buy, but they could just be being nosey.
Okay, so some people have returned the NDA and I’ve sent out the memo… what now?
When you send out the Memo of Sale, send out a deadline. Give a month or so from the last one going out, and say that any questions arising have to be dealt with in this time frame.
Once you’ve reached this deadline they must express official interest. Or not. Remember they might not.
So a: ‘Please find attached memo of sale. I will be happy to answer any questions arising from the document. Deadline for formal note of interest is MIDDAY on FRIDAY SEPTEMBER XXX and offers must be received by MIDDAY on FRIDAY SEPTEMBER XXX (a week later).’
Questions… all the questions…
Be prepared for them. If you don’t know an answer, find out. If they are asking, they are interested. This is good.
These will not always be structured as a simple sale. They may offer future profit share. You have to really understand them, and weigh them up on their merits.
Hmmm. So what went wrong? Why did no one bite or commit? Don’t give up is the key. You have a list of people who were interested in your business, use it. Contact everyone that received the Memo, and ask them to reconsider making an offer. You never know. Perhaps the buyer is there after all…
If you don’t get an offer, go back to the drawing board. Reach out to new people. KEEP TRADING ALL THE WHILE! There is a buyer for every business out there.
Completing the sale
This takes longer than you think. You need to get lots of final i’s dotted. Be realistic with your completion date.
What I’ve learned
Selling a business is rarely straightforward, but the key is to find the right person to sell to. It can be a two-way thing. Keep trading where you can, and be realistic about what your business is worth. If you have more than one buyer, weigh up the pros and cons of all the offers. But most of all, be prepared, and be ready to go.
Would I do it all again?
I can’t see myself every working for someone else now that I’ve tasted the freedom of business ownership (in fact there is already an interior design and ceramics business model emerging). Right now, I am doing some design work, I’m doing some freelance writing (please do drop me a line should you need any website content or product descriptions written up, not to mention Press Releases!), and I’m working out what’s next. Because I really do think that once you’ve had a business, the thought of not having another one is just not even out there.
Is there a happy ending?
Erm, I should say so! Chez Bec continues to go from strength to strength under its new (and perfect) owner, Tanya Krackowizer. My brilliant business partner is likewise, winning at Bridal Boutique ownership, and continues to be someone I consider lucky to have in my life (even if we’re separated by the Channel now rather than the A21). I no longer have to fear the failure of Jersey Post (and the wroth of brides on a timescale), and I’m hatching plans. Big, clay and interior design based plans….!
And along the way I have met so many wonderful (mostly) women. Seriously, I have met people who have changed the course of my life (Ros, that would be you) and who have kept me going (Holly, your alcoholic lollies) through some tough times. Because they get it. And I wouldn’t change it for the world.