Why Do Many SME Business Owners Delay Exit Planning Until the Last Moment? Building a business over 20, 30, or even more years requires immense dedication, effort, and passion. This creation is not only valuable to you but also potentially beneficial to your family, employees, and prospective buyers. Yet, when it comes to planning a business sale and exit strategy, many retiring SME business owners procrastinate. Why is this the case?
It's understandable. The thought of ageing can be daunting, and delaying the inevitable sale of your business might feel like a way to postpone the realities of retirement. However, time only escalates challenges. Health issues, market shifts, or buyers’ changing preferences can complicate your plans if you haven’t started early.
The last thing you want is a hasty sale. A rushed exit can be stressful, reduce your buyer options, and most importantly, diminish the value of your business. Selling under pressure or choosing the wrong buyer could result in losing up to 50% of your business’s value—a significant blow to an asset likely supporting your retirement plans.
Why Timing Matters
For many, the business is one of their most valuable financial assets. It's crucial for funding retirement, securing a legacy, and confidently transitioning into the next life phase. Yet, selling a business is often more complex and time-consuming than owners anticipate. It's rarely as simple as putting the business on the market and watching offers roll in.
Many sales take longer than expected. Depending on market conditions, buyer readiness, and your business's preparedness, it could take 12 to 24 months—or more. Rushing it increases the risk of mistakes, missed opportunities, and a lower sale price.
The Risks of Delaying Planning
Postponing preparation risks narrowing your buyer pool to those solely driven by financial gain. Such buyers aim to maximise their own returns, often undervaluing your business. Without adequate preparation, you're more vulnerable to such strategies. Furthermore, lack of competitive tension—a key to securing a strong sale price—works against you.
Here’s what can happen if you don’t start early:
· Incomplete Financials: Buyers demand clean, accurate records. Disorganised finances can delay the process or deter buyers.
· Operational Dependence: If the business depends heavily on you, buyers may perceive it as risky.
· Missed Opportunities: Without preparation, you might miss out on negotiating with ideal buyers who discover your business.
Avoid the “Buyer’s Trap”
A common error is attempting to handle everything independently. Acting as your own advisor or assuming the sale will be straightforward can lead to poor outcomes. Buyers are often well-prepared and skilled negotiators. Without the right expertise, you risk falling into the “buyer’s trap” of unpreparedness, lacking competitive tension, and under pricing.
Steps to a Successful Sale
1. Start Early: Even if you're not ready to sell now, begin preparing your business. Consider it as preparing for opportunities rather than meeting deadlines.
2. Interview Professionals: Numerous experienced business brokers and advisers specialise in the UK SME market. Interview several professionals with strong credentials or recommendations to find someone you trust to manage your sale.
3. Prepare Your Business: Organise financial records, strengthen operational systems, and reduce dependency on you. These steps make your business more appealing to buyers.
4. Understand the Timeline: Recognise that a business sale typically takes longer than expected. It’s not just about finding the right buyer—it involves negotiation, due diligence, and ensuring the deal aligns with your goals.
5. Focus on the Right Buyer: A strategic buyer valuing your business for more than just financials—such as its brand, customer base, or market position—will likely offer a better deal than a purely financial buyer.
Final Thought: Your Legacy Deserves Time and Effort
Selling your business isn't merely a financial transaction; it's a significant life milestone. It's about safeguarding your legacy, maximising your hard-earned value, and ensuring a smooth transition for your employees and customers. Don’t allow procrastination or fear of the unknown to derail your plans. By starting early and collaborating with the right professionals, you optimise your chances for a successful, stress-free, and rewarding exit.
Take the first step today—it’s never too early to begin planning your future. Contact VEXUS in confidence to discuss your exit plans for 2025, 2026, or 2027. Email info@vexus.co.uk
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