Selling your business can be a path to wealth and freedom – but standing in the way is a process which can cause ‘anguish and celebration in equal measure’, according to a new report.
Private bank Arbuthnot Latham – experts in wealth planning and investment management – surveyed 200 high net worth entrepreneurs to gain fresh insight into the perils and pitfalls of exiting a business.
The findings showed that many entrepreneurs were left with regrets at the end of the process.
Indeed, only 22% were ‘perfectly happy’ with the way their exit went; two-thirds said they wished they had sold earlier or later, while others identified issues with managing risks or finding the right buyer.
The data also showed many entrepreneurs find it harder than anticipated to make a clean break, with more than 80% remaining with their business in some form, often giving time as an advisor or Non-Executive Director.
Even more – 92% – remain involved in other businesses, commonly as a mentor or angel investor.
Arbuthnot Latham Director Paul Beach, who is the company’s Head of Executives and Entrepreneurs, said: “Creating a successful company takes boundless creativity, grit and resilience. Founders spend years toiling away at the expense of their social and family lives, relentlessly investing time and capital back into the business and its people.
“On the way, some think about what a potential future exit process might look like; others prefer to go with the flow. Yet the time to step away eventually comes for all entrepreneurs, and when it does, navigating it can be as much a science as an art.
“Given the numerous moving parts, a business exit becomes an emotionally-charged, lengthy and complex process for most entrepreneurs. It requires careful co-ordination, ongoing expertise and support from professionals.”
The study recognised the diverse reasons which entrepreneurs may have had for starting their businesses, as well as the varying intentions for their eventual exit.
Wealth creation was identified as a common driver, but other motivators – seeking influence, achieving autonomy or creating a social impact – featured too.
Mr Beach added: “From the outset, entrepreneurship allows business owners to ‘dream big’ and pursue a broad set of ambitions. For nearly one in four, wealth creation is a principal driver and motivator.
“Looking closer, however, a more nuanced picture emerges beyond purely profit – one that is influenced by their diverse backgrounds and experiences. Many see entrepreneurship as the way to pursue a different lifestyle, find success outside of a challenging corporate hierarchy or, simply, do the best for their family.
“But the hard work never stops when you are fully responsible for your own success. This is perhaps why upon reflection today entrepreneurs still feel their work-life balance isn’t right.
“Over half say that spending time with their closest family members and friends has become even more important to them than before. It’s a natural step to start thinking about their eventual exit.”
Many entrepreneurs assume the timing of their eventual exit will be dictated by personal factors, such as reaching a certain age, or falling out of love with their role.
In reality, however, entrepreneurs often end up exiting more pragmatically. Catalysts can include finding a suitable successor to take over, hitting a certain growth target, or because they are working to a pre-defined timetable.
Lynne Hill falls into the latter category. She has recently exited a business she had committed to building over a five-year period.
Mrs Hill had previously spent 20 years turning around struggling businesses before being approached by a private equity firm with a buy-and-build strategy for a veterinary surgery business called Linnaeus Group.
She grew the business from one veterinary practice to 145, ‘giving heart and soul’ to the project before navigating its sale.
She told Business Leader: “We always knew we would be selling the business, we always knew that was the target; to build it, to make it as profitable as we could, and then sell it. We didn’t have a number, but we wanted to keep going until we felt the market was right to sell.
“It probably took nine months altogether from the moment the board said ‘we think we will sell’, through finding advisors, and helping us through the process, to the time it was signed.”
And would she agree with Arbuthnot Latham’s assertion that the process was one which caused both ‘anguish and celebration’?
“I would agree entirely,” she said. “The whole process was slightly longer than I thought it would be in the sense that the preparation to get up to the point of actually going to market was slightly longer than I thought it would be, and certainly very intense.
“The actual process is quite stressful, going through all the meeting and greeting you do with all the people who may or may not buy your business, and then going through the time when they start to put actual bids in.
“That’s all quite stressful because at the same time as that is taking up a lot of your time, you’re also trying to run the business. Trying to keep both things going together is definitely stressful.
“It’s exhilarating too though, and obviously when you do sell the business and you get a value for it that you hoped you would get, then it’s very, very exciting.”
And does Mrs Hill have any advice for other business owners looking to sell?
She said: “Have good advisors, make sure you choose the right people who know what they’re doing and who will support you through the whole process, and have enough information. I was lucky that my FD had been through the process previously and knew the type of information that we would require.
“So I suppose, because we always knew we would sell at some point, we prepared for that from the very beginning, and that would certainly be my advice to people started up businesses; try to get the processes and try to get the data, set it up so you have the data and the information ready for sale.
“It’s worth the effort – the more effort you put in, the better it will be in the long term.”