Cash is king? Why it’s not all about the money when you sell your business
Is the financial element of a ‘liquidity event’ for fast-growth company entrepreneurs the be-all and end-all? Our Young Guns reveal their motivations
Is greed good? When it comes to selling your business 58% of the pre-exit entrepreneurs we surveyed as part of research carried out with accountancy firm haysmacintyre, admitted financial gain was their priority.
However, not a single one of the Young Gun respondents who had sold their company put it in such stark terms.
Post-exit a handful admitted they’d received an offer they couldn’t refuse, but the majority pointed to good timing, with new ventures, having taken the business as far as it could go, and thoughts for the long-term future of the business providing a sense that the critical decision was taken strategically.
Leaving something for the buyer
For Feather, timing was critical. “For me selling the business was the right time due to the previous three years of intense growth, which made it very attractive for a buyer,” he says. “Personally I had taken the business to where I wanted it to be and felt that if I sold now there was enough still in that marketplace for a buyer to see further growth and opportunity.”
While perhaps some, having achieved wealth, do not wish others to believe money was their driving force – a perception that can be undesirable – haysmacintyre partner and head of creative, media and technology Natasha Frangos believes there are more layers to it.
“I think the reasons for an exit are often more complex and attributable to a combination of factors, financial gain being one but also strategy, timing and market opportunity,” she says.
“In fact not being in tune with or receptive to such opportunities could be detrimental to the longer term growth of any business. It could result in a competitor gaining an advantage and change the dynamics of the market.”
Valuations and getting the ‘magic number’
But there’s something else at play, Frangos believes. Having worked through the process with business owners many times the valuation achieved can sometimes leave a sense of sellers’ remorse.
“An entrepreneur may have a higher exit valuation in mind before going into a potential deal or even considering an exit,” she says. “When an opportunity is taken the driver could be down to other factors, which also means that the original desired valuation is not achieved, thereby diluting the importance of a financial gain as a reason for selling.”
A key question to ask, suggests Barry Newbury, managing partner of Epoch Wealth Management, is ‘what are you not doing, by doing what you’re doing?’, which is tied up with the opportunities you feel may be falling by the wayside by keeping hold of your business.
“These less tangible things – the real reasons you work so hard – are vitally important when working out your ‘magic number’,” he says, “but they are not always obvious to ambitious, driven entrepreneurs.”