Images October 2019 Digital Edition

KB BUSINESS DEVELOPMENT www.images-magazine.com 54 images OCTOBER 2019 Meet the acquirer I ’d like to introduce you to the person that many small business owners have in mind from the day they start trading – the person who’s one day going to take it over and send them on their way with a bag of money. This is the acquirer. Before I get started, let’s assume that, sooner or later, your exit strategy is to sell your small business to an acquirer. We’ll also assume that you’re not going to be one of the few lucky owners to be approached by a potential acquirer, and that you’ll have to initiate the sale of your business by finding one yourself. The importance of discretion First, there’s an important topic to address: discretion. Even the slightest hint that you’re considering selling your business will almost certainly be unsettling for your employees, customers, and suppliers. At some point they will all need to be told, and possibly involved, in the process. But, until the time is right, it would be better for the selling process if you were discreet. Your employees are likely to be the most perturbed by the news and, to put it bluntly, you risk a potential acquirer’s enthusiasm for the deal waning rapidly if they have any indication that key employees are likely to quit. Acquirers worry about smooth ownership transitions – key employee departures can mean a rocky start for a new owner. Employees value security and are wary of change. So, when the time comes to take the employees into your Michael Best says it’s never too soon to start thinking about selling your business It’s often true that a business has good potential, but why would a buyer pay for it?” confidence (usually some time before announcements to anyone else), break the news thoughtfully, keeping in mind their concerns and insecurities. One technique for retaining key employees is for both you and the acquirer to demonstrate that you value their ongoing participation in the business. A good way to do this is to jointly offer a generous cash bonus. You could pay half at the time of the sale and the acquirer could pay the remaining half after, say, a year if the employee is still there. I’ve found that this works very well. The question of value You must have a reasonable idea of your business’s value before entertaining any serious thoughts of selling it. There are tried and tested methods for valuing businesses, but placing these methods in the hands of anyone but skilled professionals is like placing a scalpel in the hands of anyone but a skilled surgeon. This is why I favour a fair market value prepared by an experienced expert as the first step on the road to disposing of your business. Business valuations A skilled valuer can quickly and accurately estimate a small business’s value using a few key pieces of information. Your valuer will tell you that most small businesses fall into one of three categories for the purposes of valuation: going-concern value, asset value, or liquidation value. For our purposes, I’m going to assume that the acquirer you’re seeking will only be interested in your business as a profitable going concern, which is most commonly assumed to be an enterprise cruising along routinely doing business and, ideally, turning a profit.