A long goodbye or fond farewell?

New research reveals that although 46 per cent of entrepreneurs believe that selling their business will take less than one year; the reality is that it actually takes up to two. The report: The Long Goodbye: Myths, realities and insights into the business exit process commissioned by Coutts & Co, examines for the first time the challenges and concerns business owner’s face during their preparation for and throughout the business exit process. The Journal speaks with David Foster, head of Private Banking, RBS Coutts (Cayman) Limited, to find out more.

The report, which draws upon the experiences and insights into some of Britain’s successful entrepreneurs, industry academics and experts from within RBS Coutts, also reveals that on the day of actual sale, only 36 per cent of entrepreneurs felt elated or happy, which was nearly matched by the 32 per cent who said they were relieved and the 26 per cent who were filled with tiredness, sadness or anti-climax. On a financial level, 59 per cent of entrepreneurs overlooked their financial planning until the last minute, despite 79 per cent agreeing that it is an important part of the process.
 
The report also found that:

  • 71 per cent of business owners, consider themselves ‘exit obsessives’, who think about selling their business on at least a monthly basis;
  • While one in four decided to retire early following exit, 40 per cent still needed the thrill of running a business and went on to start again. 51 per cent also still have some direct involvement in the business they have sold;  
  • 89 per cent of entrepreneurs supported the creation of a specific exit plan;
  • Before the exit, entrepreneurs rank their priorities, as price (28 per cent), readiness of the business (17 per cent), cash exit (11 per cent), market conditions (7 per cent), long-term security of the business (4 per cent) and a fast exit (2 per cent);
  • However post exit, entrepreneurs rank their priorities as price offered (36 per cent), followed by the long term security of the business (15 per cent), suggesting that they are more concerned about its survival after the sale, and a fast exit (12  per cent) becomes considerably more important; and
  • 50 per cent of respondents said that their best advice for someone planning to sell is to get the right advisers on board.

 “This report has shown that alarmingly, two-thirds of entrepreneurs are risking long-term business success by not giving proper thought to their exit strategies,” Foster said. “But in today’s difficult market, while planning for this exit may not seem an obvious priority for owner managers, the buyout industry will eventually open up, merger and acquisition activity will increase, as will private equity investment, therefore it is essential that entrepreneurs and businesses start planning if they’re looking to take advantage of an economic upturn in the future.”
 
The report highlights that only seven per cent of businesses offered for sale attract a buyer – partly because they’re marketed really badly and partly because there is not value in the business. Therefore preparation is fundamental.  Even though there are few opportunities to sell now, things will change and they may change fast. 
 
Foster commented further: “Creating businesses of scale is often a marathon rather than a 100m sprint.  Weathering the recession taps the creativity and resilience that is at the heart of any entrepreneur and in fact often in recessions great businesses are founded as the uncertain and volatile markets spur entrepreneurs to seize opportunities. 40 per cent of entrepreneurs gravitate back towards starting or running a business post exit and it is this energy to create businesses that pushes entrepreneurs to thrive and drive a countries economic well being. The wealth created through the successful exit is an important element in fuelling this cycle.”
 
The 20 page report, which is available by visiting www.coutts.com/entrepreneurs contains case studies, interviews and analysis from entrepreneurs in a variety of industries, both pre and post exit.

 

Business-Exit-David-Foster

David Foster, head of Private Banking, RBS Coutts (Cayman) Limited

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