Our Corporate Finance Partner, Steve Plaskitt, shares his expert knowledge on selling shares in your business…
I often advise clients who are unsure of the best decision for them, especially when they are confronted with decisions that could change their lifestyle or business. Should they follow their instincts or take control and make careful plans? Simply put – should they follow their heart or their head? It is hard for the shareholder to know if they are truly ready to accept change in their business ownership.
Many business owners who seek external funding, or are considering selling their business, have been through the same thought processes. It feels like a lonely path as no one else can understand how you feel about your business; all of the hours you have put in to develop it and all the plans that you have for the future.
If you do not own all of the company, you may find that you are in disagreement with your business partners. This may be because you all have different personal motivations, family backgrounds, levels of personal wealth and personal ambitions.
When will you be ready to sell?
If, as the saying goes, “you only sell your business once” then how do you know you are really ready to sell? How do you know when you should divert some of your valuable time, attention and energies away from the day to day element of directing the business? When should you put yourself open to being courted by suitors (and rejected by some), before you eventually find the right buyer? Will you then be prepared to negotiate and accept an offer?
From almost twenty years of experience, I have found that some shareholders are more mentally ready to explore their options and are open to accept their position. It is these shareholders who who are able to make the right decisions based on their acceptance of reality and their own self awareness.
For some business owners, an offer to buy their business is a personal issue rather than a corporate one. However, as both a shareholder and a director you have a duty to consider the corporate position. It can come down to whether you are ready to let go of your own perception of your control of the company.
Questions to ask yourself before selling
Aside from whether the timing is right to sell your business, some questions which you should ask yourself to help with your self awareness are as follows:
- Are you the right person to drive the business forward now and for the next three years? Would another buyer be able to offer different management skills or bring the correct level of corporate governance and decision making?
- Would the growth in your company be accelerated by a trade buyer who could bring additional networks and customers to help you in the market?…
- …And would they be able to take away some of the strain that you may experience and which hold back your company’s growth? E.g. dealing with increased regulation, managing personnel issues or ensuring that sufficient finance is there to allow your business to flourish.
- Does the business require more funding to take it to the next level of performance? Are you prepared to accept the additional monthly repayments or should you bring in external equity funders?
- Would you be better off if your business was in the ultimate control of a bigger corporate who can back you and your decision making?
- For those who would prefer to find an investor/buyer to buy many of your shares whilst allowing you to keep some – is this a better solution than keeping full ownership and control and facing the future on your own?
There are no simple answers to these questions and there are many more factors to consider. Every situation is different.
As a Corporate Finance adviser, I look after clients seeking disposals or equity fundraising and no two situations are the same. I work with clients to help them assess their own personal and corporate positions and goals and this is one of the most enjoyable aspects.
It is often only by taking advice and taking time to understand your options can you justify your decisions – to yourself, your business and to your family.
Please feel free to contact Steve Plaskitt at Tait Walker to discuss your plans for your business.