In 2020, it was estimated that there were some 5.9 million small business firms in the UK.
A firm was defined as small if it employed between 0-49 employees.
Of those 5.9 million small firms, 1.4 million had employees other than the business owners.
Those small businesses did employ 16.8 million people, so they have a massive impact on the UK economy.
If you are a business owner, you may well plan to exit the business by selling it in the future.
You might sell it to a similar firm looking to grow or a buyer who wants a “plug and play” entry to the particular business area in which you operate.
You might even sell it to your employees through some form of a management buy-out.
Whatever your plans, at some point, you will have to address the vexed question of “how much is my business worth?”
You might well seek the advice of your accountant or a business broker to arrive at the answer.
With that valuation, you might then take your business to market, and you may or may not find a buyer at the desired price arrived at through that valuation.
We believe there is another way of looking at the question of valuation. Not “how much is my business worth?” but “for how much do I need to sell it?”
What if the amount of money (net of taxes and costs) that you need to sell your business for is lower than the valuation your accountant or broker has placed on the company? Would you sell it?
If the price you were offered enables you to have the life you want for you and your family, might it be worth accepting the lower figure if offered?
If the value you need is lower than the value of your business, then it creates some interesting choices for you.
It puts you in a different negotiating position. Perhaps you might accept a lower valuation in return for less demanding conditions and warranties.
It might mean that the buyer was willing to pay more upfront than in staged payments.
To be in this solid negotiating position, you will need to know how much is enough. The best way to do that is to have a financial plan. Your financial plan will give you the answer.
Imagine your accountant has told you that your business is worth £1m, but a buyer offers you £850,000. Would you take it?