Three things are certain in life; and as accountants you are best placed and most trusted to help clients with all three. It’s an old adage attributed to Benjamin Franklin that “in this world nothing can be said to be certain, except death and taxes!” Actually, there’s a third certainty. It’s a certainty that every client you serve will one day either exit, put succession in place or fold the business. As accountants, of course you work diligently to help clients with the first two of those certainties – death and taxes. But what of the third?
It’s an interesting question to ask a client at least once a year. Most business owners or shareholders, from time to time, will find themselves contemplating their business exit possibilities. Economic pressures, Brexit uncertainties, management responsibilities or simply missing out on time with the family can often challenge clients, and quite rightly their minds begin to explore the options.
Of course, selling a business can be a daunting or worrying process. For many of your clients it is the biggest financial decision of their lives, and that fact alone can drive them to inactivity, ultra-caution or worry.
Whether it’s how to value the business or how to be sure they get the best price possible. Or simply not knowing how best to go about it. The outcomes are deeply significant for your client and their family, and significant for the staff they leave behind.
So how can ICPA members help?
ICPA and BCMS already have a unique and longstanding partnering scheme for helping SMEs who want to exit. However, the reality is that most ICPA member clients are too small for the SME scheme and with Tony Margaratelli working hard behind the scenes, BCMS can now offer ICPA members a partnering scheme for smaller clients; typically, in the £250,000–£1.5m turnover range. This new service is called Kingsbrook.
What does Kingsbrook offer clients?
There are four critical success factors in the sale of any small business:
1. Being proactive: The best buyers of small businesses are almost never looking to acquire. It’s no use uploading a business sale onto a paper or web-based listing, expecting a buyer to call. This approach has a shockingly low success rate. The Kingsbrook service has a team of multi-lingual researchers with access to a database of over 150 million potential acquirers. This team will source potential acquirers, and match those buyers where potential synergies are made possible by the acquisition.
2. Not valuing your client’s business based on multiples of EBIT: The biggest single mistake made is to put a value on a client’s business based on multiples of past profit. This only ever serves the buyer and never the seller – your client. Ultimately, the value of a small business is based entirely on the motive of the acquirer. Getting this right is at the heart of the Kingsbrook methodology and is evidenced by the fact that on average the highest offer received for clients is two-and-a-half times greater than the lowest!
3. Competition to buy your client: Ultimately, in the successful sale of a privately-owned small business, nothing is more important than having a choice of buyers. Competition to buy your client is the biggest single lever impacting the likelihood of sale, the terms of the deal and the cash price. Conversely, not having a choice of strategically motivated buyers is the single biggest reason for an unsuccessful sale.
4. Selling the future: No one ever buys a company’s history. No matter how good your client’s past performance, as a buyer the only thing I can ever be truly interested in is the potential for future growth that this acquisition gives me. Kingsbrook processes ensure this future potential is clear and authentically communicated.
If you have a client who may be interested in exit email David.email@example.com for an exploratory conversation focused on the likely saleability of that client. This is free and without any kind of obligation. When that client engages Kingsbrook there is a an introductory commission for the ICPA member referring.
For full details and for a free copy of my book ‘I Sold Up’ email David.firstname.lastname@example.org and simply type ‘details and free book please’ into the subject line.
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