Ideas & Observations
Q&A: Chris Hird, corporate finance partner at Haines Watts
November 15, 2023
Tell us about your role at Haines Watts
As a team we work alongside owner managed business to support them with their exit plans. Leaving your business behind is rarely a snap decision. It takes time, strategic planning, foresight and often comes with an emotional toll.
Whether it’s scoping the right buyer and marketing the business, driving business growth ahead of a sale, preparing for due diligence or providing a business valuation, we will help to guide them through each step of the journey.
So, our work is very varies and every day is different.
What is the most important consideration when exiting a business?
I would say is it’s all in the planning.
If you are selling your business you will need to consider what you want to get out of it in terms of legacy, value and the speed at which you want to exit. Then it’s really working backwards from there.
It’s natural to want to secure the best outcomes for your business. Everything from your exit route, structure and tax position need to be taken into consideration in order to maximise that value.
Clearly, if you have a set figure in mind, the valuation of your business needs to stack up against that number. So, if the valuation is lower than you had anticipated, work will need to be done in order to boost profits and grow you organisation.
How you’re going to do so will be the next cornerstone to contend with. Do you want to grow through acquiring other businesses? Or are you going to implement an organic growth strategy, using your current resources and assets to increase efficiency and profits? Maybe the answer is a combination of both. But whichever strategy you decide on, you’ll need to consider those initial priorities in terms of value, legacy and how soon you want to exit before ploughing ahead.
If you are selling your business to a third party, it’s also really important to step into the shoes of the buyer. What would you want to see in a business which you were looking to buy? Getting your house in order ahead of your sale will really lend you favour here. It will make your business easier to market and more attractive to buy.
What do you most frequently see as the biggest challenge when exiting a business?
The biggest challenge I see, particularly with the types of businesses we work with, is that owner managers usually haven’t sold a business before. Most of the time people only exit a business once. So, inevitably they don’t know what to expect and a lot of the process is unknown ground for them.
It’s also quite an emotional process to leave your business behind. Whether it’s an entrepreneur who has built their business from the ground up, or a family business which has been passed through generations, a business is rarely just an income stream for the owner. It’s a representation of their entrepreneurship and ambition, as well as the inevitable sacrifices that will have come alongside owning an organisation. Their blood, sweat, tears and time have gone into it.
So, supporting and educating people through the process, and helping to guide them through with confidence is a key part of my role.
What advice would you give to someone considering their short and long-term plans?
When it comes to long-term plans, owner managers need to consider when it’s the right time to press the button and exit. Ideally, you’d start planning three years in advance to get everything in place and to maximise value. This will ensure that your business is on the crest of a wave going into a sale. Clearly, higher profits mean higher value and the best way to maximise value is in the planning.
In terms of the short-term advice, again it’s really just being prepared. A sale process is quite intense, particularly the due diligence phase. Lots of information will be asked for in a very short space of time. This can feel very bumpy and disorganised and there’s an awful lot of work to be done. I think that can be overwhelming for anyone. So, having a robust outlook on the process and preparing yourself for it is key. It’s going to be rough for a three-month period but keeping your long-term vision in mind will help you through.
Where can a business owner seek advice for succession planning?
The best people are advisors. Lawyers, corporate finance experts and tax advisors can help you to navigate the exit process confidently and build a really comprehensive strategy.
And because there are so many different aspects to think of, and many different avenues that you can go down, advice at the early stage of the process is key.
The worst thing that can be done is if you decide to sell up and exit tomorrow. It’s all in the planning and that is where getting professional advice at a very early stage can really add value and help you to achieve your goals.