The Complete Business Exit Strategy You Need to Know

Today's episode is all about building a business of value for maybe Exit, or maybe for you to live the life that you want to, or maybe to be in a position where you can hand it down to other people.

But it's all going to be about building a business of value.

Your team can have some brilliant ideas.

So if it's all your ideas that you're passing on and the new business coming in, then you're not necessarily enabling them to come on the journey and meet their full potential moving forward.

And they can face into some of the problems that may occur because they know the business business inside out and back to front.

I get frustrated when people come to me and they say, well, I'm paying too much tax, or actually, I want to focus on getting my tax cool down, because to me, that's actually focusing on the wrong thing.

And yes, of course, part of our proposition, our service to our clients, is actually to help ensure they pay no more than they should do.

But our focus is, look, the big prize is actually making your business into something of value because that's going to be way more important than you tweak around trying to save.

A few quick attacks on the journey.

What about the unforeseen things we might plan for this perfect exit at one point in the future, but what if something goes wrong?

Welcome back to this week's podcast.

So I'm absolutely thrilled.

I've got two amazing guests and people I've come to know the last couple of months to talk about a subject that I think is incredibly important for businesses.

If you're a business owner right now and you are thinking about your business and what value you place on your business and what you want to achieve in your business, then we're gonna.

Today's episode is all about building a business of value for maybe Exit or maybe for you to live the life that you want to, or maybe to be in a position where you can hand it down to other people.

But it's all going to be about building a business of value.

And I'm absolutely thrilled that I've got two people with me at the moment.

I've got Martin Vincent, who is a chartered accountant, many years of experience in building businesses, worked with big companies as well as setting up his own business, which he later then sold and now runs a business called 55 Financial.

He runs that with his wonderful sister Caroline, who also had an incredible career in financial services.

Started out as an advisor, working with clients and supporting them before moving to a management position and then deciding also to to, to, to leave the corporate world and set up a business that's focused on helping companies achieve their maximum value for their business.

So firstly, guys, welcome the podcast.

Thank you very much.

So look, we're going to go through a number of topics and conversations around today around building a business and achieving success in that respect.

But just to, you know, I've obviously given you a bit of a bio for you guys, but just in your own words, just share a little bit about what makes this area so such an interesting area for you guys, what makes you passionate about this for and helping businesses and the business owners you.

Work with do this, I would say because it comes from years of experience and you look back on the journey and you think, well, actually experiences do shape you.

And I'm certainly not sitting here as someone who's got everything right all the way along, but I've got to this stage in my journey and recognize that I could have done things better and think, you know, a lot of people would look at me and think, well, that's that, that's a guy there who's actually been successful.

Yeah, he sold businesses.

But, you know, I believe now I've got something to offer and people that are on the journey that I was on and, you know, my plan is to help them avoid the mistakes that, you know, I made and deliver value for, for them and their families.

We're going to talk about your, your particular business exit Martin in a little while and back onto Caroline as well.

In terms of the passion that you guys have for, for helping people achieve things that come, that's come through in the times that we spent together, it's something you already, you care about is enabling business owners to transform, if you like their journeys right now and achieve this end point that people want to get to.

I know that's something we've talked about.

This is something you're passionate about, isn't it Kat?

So I would reflect back on my corporate career, and I've probably recognized it since I've walked away from it, is that the thread all the way through is deeply caring about the difference that you make, but being really curious about facing into problems and challenges and seeing those as opportunities to turn them around.

What is it that you're trying to achieve and how can you get there, but being really clear on what that vision is and the steps that you're going to take in order to make that happen.

And we're going to talk about a bit about it later on, which is that a lot of business owners, I remember I remember interviewing Mike Claire, who sold dreams for 200 million and then sold it and then realized, you know, he said he cried for a week because he'd lost his baby and he didn't know what to do.

So that element around what to do and how to do it is going to be key.

So, as I say, the podcast this week is going to be a bit longer than normal, actually, because we've got the chance to have some time with Caroline and Martin, and we're really going to explore the elements of what you need to put in place to build a business that.

That has value.

And most business owners work very hard.

They commit their whole lives.

In many respects, they make significant sacrifices to build businesses.

And most people, in some cases, and probably fair to say, maybe they get to a point when they're then a bit tired or they want to change and they haven't done some of the work that's needed to get the business in a great position to sell.

So we're also going to pick up on that point, and Martin and Caroline will share a number of their thoughts on what you can do to be in that position.

So, so let's start off, Martin, just on that point, what are some of the biggest mistakes you think business owners make?

And you're an accountant, you see this and have dealt to thousands of balance sheets and conversations and discussions around this.

What are some of the biggest mistakes you see business owners make when they are.

When they think about trying to exit their business?

Yeah.

So as an accountant, I'm bound to have at the top of my list not investing sufficiently in financial systems.

And I'd say that's one of the foundation stones of a good business journey towards creating value.

But I think probably more generic point would be to say that actually not thinking that you're going to exit at some point right at the beginning.

And people may be on their business journey and as you say, may have spent many years actually investing in it and spending time on it and living, breathing it and thinking about work, even when they're not in work.

But that doesn't mean to say they've actually got something that's sellable.

So there's a tendency for some business owners to think, well, I've actually put a lot of effort into this, so therefore it must have some value to somebody else.

So I'd say that's probably one fairly big mistake, and then another one would be leaving it too late.

So if you're on the point of wanting to retire or you've just fallen out of love with your business or it's just taken it out of you and you've got some health related reason to exit and you want to sell.

Well, you may well be able to get to a sale, but you won't achieve the value that you could have done had you started the plan to exit an earlier stage.

And that's really interesting.

Is it about sort of starting things too late?

And that's an area where you guys.

So you know, let's ask a question.

How soon should someone look at it?

Because, and I give a personal example here as well.

When I had my business that I built up, one of the things that I actually got wrong with that business was I was too focused on the exit at the start.

I had a software business, a SaaS software business and everything at the time was around get to this number, get to this number and meet at this point.

And I was focused on, as I said to people, too much on a number, not about the customers and serving them, looking after them, which is what most businesses do.

So how do you balance that, Carol?

Because there's the challenge of focusing on the endpoint, but then also not being obsessed by that, that it consumes you and becomes everything.

I mean, it's a big challenge for business owners, isn't it?

Yeah, that takes me back to my financial advice days actually where you're sitting with people that are living in the moment first of all, but you're also sitting with people that are focusing on the end goal.

Or it could be the advisor sitting at the end goal, the output and not thinking about what they need to do day in, day out to create something that's really successful that will ultimately lead to the output in the future.

And I think when I think about sort of your plan for the future and what you want to do with that time, it's really important to think about how you, you get that balance right from the outset and, and how.

You do it, I guess is the difficulty, isn't it?

I guess because we are number.

Yeah, we're people in numbers and business driven and you know, you focused on the task in hand.

But maybe what you're sort of saying as well, it's a step back, I guess what's going on from your perspective, Martin, as well, it's a step back and say what is it you want this business to be?

And you say it takes two years.

What's that?

You know, timeline.

How does that sort of time that come together when it was especially when, you know, let's say to example, when when you sold your business and you sold your practice, was that.

Did you do all these things ahead of that time, or is this something you wish you'd done that you didn't do?

Ben?

Yeah.

So, first of all, I don't have a major problem with obsession.

I think that's actually good to have a laser focus on.

This is, you know, this is the goal, and this is, you know, this is the path to that goal.

And being very obsessive about numbers, I'm bound to say that as an accountant and I.

In my experience, people tend to have a time horizon.

If you say to them, well, what is the why?

And they may well say, well, I want to build a business that I can sell.

But that time horizon tends to be three to five years.

And they're probably right.

Actually, three to five years probably is a good window of time for them to plan and then exit.

That's not okay.

Well, we need to put the business on the market now and start looking for buyers.

It's actually to start the process of getting the business to a point where it actually has some value and someone may want to buy it.

So I think that would be the time frame.

And I think I've been fortunate enough to have a few occasions where I've gone through this process personally.

And my most recent one for my own practice was that I was one of those people that did get too focused on process, was obsessed about efficiency for both our business and for our clients, and didn't really think, well, actually, am I creating something that someone would want to buy?

But fortunately for me, some of the things I was doing in the quest for efficiency actually was creating a model that someone else would be interested in ultimately.

But I didn't have that laser focus around.

Well, actually, am I creating something of value here that someone wants to buy?

And I got to a place where, oh, actually, I'm quite tired of this, and I can't sustain this working rate because I was working incredibly long hours, weekends, and when I wasn't in work, I was thinking about work as well.

So, you know, that is a big reflection and a big lesson that I'd like to share with others.

But as I say, I got lucky because some of the building blocks I put in place almost by accident in my pursuit of what I perceived as excellence in efficiency, both for me and for clients.

So you talk about your practice as well, if you're able to share, because I think it'd be really useful.

You know, obviously, you set up your practice, you know, initially, and then you grew it.

I mean how many people and did you, you guys have when you, when you, when you decided to, to exit and, and what were some of those systems that were critical you mentioned about efficiencies and structures and systems?

What were some of those that you were really, you know, focused or putting in place at those times?

Yeah, so the simple answer there to the one about people, we got up to 18 directly employed people.

So we were reasonably sized practice and we were sustaining our rate of growth.

And we were again, I consider the business and myself fortunate because we got in on the wave of a shift to cloud accounting.

So now we're a new wave of AI presenting another.

Yes, you know, challenge.

Yeah, a massive opportunity for sure.

And I think, you know, accounting is quite a traditional sector and so cloud accounting actually presented a massive opportunity for us to go in and disrupt and use the tools available to not only create efficiency at our own practice, but deliver that for our clients.

So we would, for example, go into a business.

And this is, this is not to slight any software vendor, but just fact what happened in the recent past.

So Sage was a major supplier to the SME small medium sized enterprise market.

And then disruptors like QuickBooks and Xero came along and because those tools were so much easier to use both inside and outside a profession.

What I mean by inside the profession is accountants.

And we were able to extend our service package from preparing the annual accounts at the end of the day, end of the year and having perhaps a single conversation with clients to actually, we can actually take over your entire financial management systems because actually using these tools we can probably do this service much more efficiently than you can yourselves.

So that was our, in a way, that was our usp.

You know, we are really, we're great technicians and I had good fortune to be equipped with a technologist's brain because I'd actually worked for computer businesses in the past and also I worked with the founder of a health tech business as well and was sitting in a management team that was with Talk Tech with Time.

So that gave us an advantage and it got us to a good place ultimately before we eventually exited.

You guys, as preferences, you know, you've got.

Can you remember the time when Martin said to you, Caroline, that I'm thinking of selling this business and going in my own pub.

Can you remember that conversation?

Well, I would just like to go back to that because it, it did bring back a memory of Martin working extremely long hours and really committed.

And I, I openly say this often is I always put him on a pedestal and with regards to how successful he's being within business.

And we had a conversation one day about success and what does that look like?

And success could be the business that you've run, or it could be how you've led your business more broadly and what you see as success.

And that was really eye opening for me because how we perceive ourselves can be quite different.

And it took me back to sort of when you, when you're making that decision about selling your business, could be that you think you're reaching retirement age, or it could be that you want to carry on forever and you don't even want to have that thought that you're going to be in this business forever and a day until you take your last breath.

But it's also really important to be thinking about what else there might be in life that you want to be enjoying and starting to explore some of those other things that you might not have created the space to have while you're in the business and enjoying it.

And what about the impact on the other people that are really important to you in your life?

And that's probably a big reflection for me in, in business, you can put everything into it, but there's other significant people that you want to be spending and creating your life with.

The other thing that I think, you know, takes me back to my financial advice days is what about the unforeseen things?

You know, we might plan for this perfect exit at one point in the future, but what if something goes wrong?

And there's been a situation recently where the wife of a business owner, the business owner passed away and now she's left with a business that she's not really sure what to do about.

So I think it's really important to make sure you're not just thinking about your plan, but also what would happen if.

And that was, you know, when I was giving financial advice previously, we always looked at, you know, what's the ideal situation and what if something goes wrong?

What do you want to, what's the ideal situation that you would want to happen for your loved ones and your, your, your team, your colleagues and so on.

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Now back to the podcast and let's pick that up afterwards.

I think that's a really good point around, you know, people talk about sort of, you know, insurances and power of attorneys and all these elements, but actually the core aspect of that is building an engine that operates without you for one of the better friends and actually operates, you know, you can go off and do what you want to do and go off and, you know, the question I was, someone said to me, and it's a really great question, is, if you go on holiday, can your business operate without you?

And, you know, and we're all a bit obsessed by looking at our number, looking at, you know, the business details day to day, but, you know, can your business carry on without you being there?

Have you got the structures in place where people can know that they can handle queries?

Have you got delegation in place where people can make decisions?

Because the other key thing is about making decisions and not, you know, if you're off for two weeks on, you know, enjoying a break, then you don't want the business to stop.

So there's a number of these things that maybe we'll pick up and talk about.

But, but, but just building the point around Martin as well, you know, what, what personal questions the business.

So someone's listening to this thinking, okay, I'm thinking of, you know, potentially, you know, maybe looking at exiting my business, maybe in time, what personal questions that the owners need to ask themselves.

And Caroline, when they're thinking of selling, what are the things that you would, if you were sitting in the room with them and having a glass of wine and chatting to what they're going to be, what would you say to them?

They should be asking themselves.

Yeah, so for me, it's about reflecting on how far you've come, what you've built up and what's next.

So I think for me it is, you know, the business is part of a business owner's identity potentially and their purpose.

So where else can they find that purpose?

What skills and experience have they got that they could take on and add value?

There's a book I read about, you know, the four stages of your life and how, you know, you have your childhood and then you go into adulthood where you're thriving to build and build and build and then you get to the third stage of your life where you've got so much wisdom and experience and how can you then pass that on to people that can benefit from your experience and their journey and their learning as well?

So I don't think we always recognize quite how much value we can add to other people in life that we might not have recognized.

So how might you spend that time?

How might you spend more time with friends, family, networking with different people in your life that you might find really purposeful?

Some people would want to travel, some people don't.

So it's thinking about having a plan to really, what else might you want to get out of your life moving forward?

It could be a new opportunity, a new business opportunity might come up when you take the space to reflect and think.

It's such a good point, actually.

And again, people I know that sold companies that have got to the point where it's all been done and even, you know, even in some cases a buyout and for example, sorry, there's an earn out where.

And we'll talk about the nights maybe afterwards as well, where in most cases you, you know, you're going to need to stay with that business for a period of time until such a time as, you know, the other, the, the new owners decide you're not needed anymore, you've hit your goals.

But that element of then waking up and going, what am I going to do?

So we talk about you, we're talking about when you sold your business, modeling that element of when it happened, the moment it happened.

Can you remember the day after and then thinking to yourself, right, what's next?

Yeah, to an extent, yes.

But as is typical with a lot of service businesses, there was a period on earn out and it was a long period of earn out.

In the end it was three years.

And that is one massive learning for me because I think for not just for me, but also the buyer, it was too long a period from the buyer perspective.

I'd say it was, it made them a little bit comfortable because I was around for a long Period.

So they didn't really have to think about how is this business going to be run after Martin does eventually leave.

And then for me it was just too long.

I'm in an environment where the priorities and strategy of the new owner didn't align directly with mine.

So yeah, so that's a major reflection.

But there was a motivation behind it because there was a long period of earnout as well.

So from there's motivation for me to be in there for a long period so I could ensure that I delivered on the numbers to ensure the earn out actually maximized.

It's a great point.

Let's just pick up on the earnout just for anyone listening to thinking, what does earn that mean?

So traditionally, again, Martin, correct me if I'm wrong and Gary, and correct me if I'm wrong, but you guys.

But traditionally an earner and certainly in my case when I exit my software business, but depends if it's a product or service business as well.

In some cases, if you're selling a product, let's say you're selling Mice.

Mice, mice, then the chances are someone might buy that business and then potentially might then pay the full amount for the business upfront.

Let's say the business valuation is, I don't know, let's say it's £10 million for example, and someone might say, yeah, I'll give you the £10 million for it and then I'll walk away because I bought the business and the product and all the assets that the business has and we'll talk about evaluations in a moment.

But if you have a service business, business invariably, which is reliance on, you know, people to deliver those services, invariably there's an earn out which will mean that the buyer might say, okay, I value the business at £10 million, but I'm going to give you half of that money now on the site, signature of the deal.

So I'll give you five million now and then I might give you two and a half, you know, million in a year's time once you hit these numbers and I might give you a further, the final valuation, two and a half million pounds at year two, once you've hit the secondary set of numbers.

So a lot of business owners might think that you're, you know, you basically get all of the money straight away.

Invariably in service businesses you don't, I mean, I don't know if again, Martin, if I've explained that earn out process well enough, is there anything you'd add to that in terms of the way I've Described that?

No.

Very good.

I mean that is the way it works.

You know, a buyer wants to de risk, a seller wants to maximize value.

So actually it's a point of negotiation because well, a seller might not be comfortable with the upfront cash so is happy to consider.

Okay, well I believe if I'm around I can actually deliver on those targets.

And that was definitely a feature of the transaction that I agreed to for my practice.

And I would say it is typical, but it's one of the things that we try to get across to business owners as part of their journey.

If they have actually reconciled to the idea that this is actually going to be a three to five year project, it's all about.

Okay, well how can I ensure that one, the upfront element of the cash is close to my expectation of value.

And one of the key parts of that is to make the business not dependent on them as an individual.

And we can expand on that as a discussion point because I think it's a very important area.

Yeah.

And also to have the systems what you say.

So Carol, it's also the systems and engine that we've talked about in place that can mean I know the person that I know that sold his business route, you know, it was like he looked at the number that he was given and was like, I haven't got a problem with the earn out number.

And the year after that, because of their pipeline and the way they managed their business was so strong that they knew with high probability that those numbers were going to happen which would get him the full value.

So he was comfortable with that.

But my, my thoughts are around the personal perspective of that earn out and when that's your business, your baby that you've, you know, cultivated and nurtured over a long period of time and then you're allowing, you know, the buyer to come in and maybe start to form, put their, put their stamp on it.

It's not underestimate, estimating that personal impact on that and there could be some conflict which you need to work through to make sure it's collaboration because the that you're leaving behind will be impacted by that transformational change throughout that time.

And you want to make sure that the culture and the environment is maintained through that time because you know, personally you're going to need to be letting go and there may be things that are being done maybe not in the way that you would choose to do them.

That's such a good point when it comes to the elements of the people because most of the time when you build, you know, unless you're very, you know, specific unique software, business only, or one or two people, you're going to have a team.

You'll have built this team of people up.

So, you know, think about when you're getting your experience, Martin, you know, the team of, you know, people that you had in place and also that, you know, as you said, Caroline, people don't know this is going to happen because a lot of this is done quite sensitively and under non disc, under non disclosure and whatever else.

How does that, that, how do they affect you, Martin, in terms of when you, the people that worked in your business, how did they react to it and how, you know, what, what can businesses do to ensure that the culture and the thing they've created, Caroline, stays through the business so that the buyer gets the maximum value for what they bought, who goes to it?

Yeah, so, yeah, it's an interesting one that, because I, I kind of think back to the time when we were past the point of no return and thinking thought, oh my gosh, I've actually got to go and explain this to the team.

This is happening.

And I guess I was consumed with the idea that I needed to deliver on this exit because as I said, my motivations were that I can't sustain this over the long term.

And what I wish I'd done on reflection is to fully consider what this journey meant of the future journey post exit for the team than you I actually loved working with and the people in there are actually committed a lot to delivering fantastic service with their clients and I suppose indirectly because of that serving me as well.

So I think on reflection it's important for business owners to consider what it means for their team as well.

And I've heard different schools of thought on this from we need to include our people in an option scheme so that they get to financially participate in an exit.

But that can deliver its own potential problems because if you've actually grown your business to a significant value, that 3.7 billion business I was talking about, by the way, had several people that were made millionaires overnight, including some members of staff actually, and taking away 5 million at exit.

So you have to put yourself actually in the mind of the buyer and you've got your workforce and they're suddenly receiving a life changing amount of money, does that have an impact on their likelihood to stay with the business and help it grow and, you know, progress to the next stage?

So I think there's, you know, there's a debate around whether a significant option or Equity participation by employees is the right or wrong thing.

So I think it's important to think, well, what is it in that, you know, we're doing as a business for the staff and I think there's non financial parts to this as well.

So I've got over the guilt now because I've had several conversations with my lovely team and a number of them have gone on to different stages in their careers and actually moved on to very good jobs.

And was there anyone in Windsor, when you think about stories, was there anyone that you can remember about didn't react very well to it?

But that's a really good question because no, no, not really.

And you know, and everyone, everyone that was there, you know, stayed with the business for, you know, a good two plus years after, you know, the exit took place.

So that tells me that they were still, you know, because if they, you know, wanted to vote with their feed, they could have left straight away.

So yeah.

So reflecting on it, the delivery for the team I feel was a huge opportunity to develop.

So we, our strategy at the time was to take people that had the ability to communicate with clients and had an ability to add up and take away, as I used to put it, and we would, you know, we were in a position to train them on the technical aspects of the delivery of an accountancy and financial management service.

But they had an opportunity to grow.

So in our world it's not untypical for accountancy staff to have be disconnected from client, whereas we took, we actually went the other way and made our staff front of house so that the relationship with the client was with them.

So everyone in the team, from the most junior person to the most senior actually carried a portfolio of clients of their own.

Okay.

So that, that delivery for the, you know, our particular team was actually, they were able to grow and develop during the life of the business.

So it wasn't, you know, it wasn't necessarily okay, they got a payday at the end, but they were in a place where they could one stay and grow and develop with the business acquired or indeed use their experience to go and market themselves on the next step of their career.

And it's interesting, obviously Martin achieved that.

It's great that you were able to do that.

But I guess a lot of companies that don't put those, if you like, building blocks for culture and for vision and for strategy in place, do they care?

And I guess the chances are in some cases you will find that people then say, oh, the business is being acquired.

Well, actually I'm out of here.

So what are some of the things that, if you're listening to this as a business owner that you think businesses could put in place that can help ensure that if that time does happen when they want to pass the business on to someone else.

So they get the same reaction that Martin did rather than Ted to the issue of people leaving.

Yeah.

And I recognize the sensitivity early on with regards to selling your business.

It needs to be confidential.

But as soon as you can start that communication with your team, to involve them within that transition is really key because many of us would recognize the change curve and how to start with, you know, we might feel desperate and down in the bottom of the because we don't quite know what's happening next.

And also if we think about employees, they're in a way of hierarchy of needs.

Security is the foundation and they just want to know that they're going to be safe and they'll be thinking about, well, what does this mean for me?

Not the business, what does it mean for me?

Yeah.

And so how do we take them on that journey?

But the other thing is your team can have some brilliant ide.

If it's all your ideas that you're passing on and the new business coming in, then you're not necessarily enabling them to come on the journey and meet their full potential moving forward and they can face into some of the problems that may occur because they know the business inside out and back to front and they can help with that transition process.

So for me, the communication treat people as adults and I would reflect back onto my own career.

In the last piece of work that I did, we were doing something, something quite ambitious and probably if we pulled our team on the journey quicker, they would have understood it because if they understand the bigger picture and what the destination is looking like in front of us, then they will be able to go on that journey with us as well.

So communication is really key.

Listen, having regular check ins, what's going well, what's not going so well, what can we do differently?

Again, we'll iron out some of those creases before they become a big problem.

Because I think we can be so entrenched in what we're trying to achieve as opposed to looking at the bigger picture.

So you talk about your team were very committed to serving your clients, Martin.

I mean, any thoughts around that?

Yeah, I mean that is exactly a very accurate reflection and that's how I felt based on what people have told me that, you know, subsequently.

Yeah, we all want to do a good job and Partly they were hopefully getting satisfaction from how we were progressing as a business.

I can remember staff meetings and standing up in front of the team and saying, oh, here's our numbers and you know, feeling half empty.

Because on the one hand I was thinking these are fantastic numbers.

What a great achievement we are.

We know we're, we're getting the business to this place as a team, but on the other side thinking, you know, are they actually getting some satisfaction from growing the business?

Because probably in reality there are things that, you know, I've learned over time that people are motivated by.

So one is personal development, which we talked about.

Another is, well, does the business actually have a purpose which is greater than growing the bottom line ultimately for the benefit of the business owner?

So that is an important reflection, I.

Think, and what you just said then is really important.

And there's a great guy called Alec Dexter who does some brilliant workshop on social value for business and he talks about a Harvard study.

And I get the stats may be slightly wrong, but the 86% of millennials think a company's job is to have a social impact, whereas 34% of them think it's to make a profit.

So actually going back to this point around big money isn't the sole driver.

Right.

It's the actual element.

Go back to the look of looking after the client.

It's that culture that's been built up of serving rather than, you know, actually if the day to day, you know, the person in the team thinks about it, that day to day job still stays the same, providing that the, the company that's buying the business has a similar value system and a similar approach and that's a part of the job of the seller to, to make sure that that's kept maintained.

Yeah.

And actually carries on as business as usual really in many respects, isn't it?

Yeah.

I don't have the stats like you, James, to quote, but I would say having a purpose which has a community orientation to it is great for the bottom line as well.

Yeah.

So it's almost a self serving objective in a way.

One, it helps retain staff because you know, they love working for a business, one which is feel successful and you know, they can be proud of if that's the right word.

But also it has a greater purpose and is actually making a contribution to society.

So just alone staff retention delivers longevity of service and a great service to clients.

So they want to stay with you over the long term.

So, you know, these things kind of feed into the bottom line.

Definitely.

So.

And I Think it's that aspect of, you know, getting people to a part of the process is key.

I want to just got lots of stuff we want to cover as part of today.

And business owners are going to be listening to this going, okay, I want to, I want to potentially sell my business or I want.

Or be in a position maybe.

And what we talked about is the option isn't always to sell, is it?

I mean, I was talking about a scenario of someone I know who, you know, built up this very successful business.

They were making a lot of money per week and what he wanted was the ability to go and play golf courses all around the world.

So he made sure that there was an engine basically in place, a system that will enable him to and a management team and a structure that would enable the business to operate without him.

I guess we sort of talked before about there being three options, didn't we?

That, that you know, when, when it comes to not just selling, it could be selling to be one.

The other option is, you know, having a management team or structure that runs the business for you, but you not having to be there.

So it's all.

You might want to pass it down, for example to family or whatever else.

So it's.

There's different options available for people, isn't there?

Yeah.

I think it'd be good for Martin to go through the auctions, but I'll share my observations.

Coming from a corporate environment and working with smaller businesses and seeing that very much working in the business and the real cog to that business rather than on the business.

And I suppose when I compare within a corporate environment where you are leading hundreds of people and you need to take those people on the journey with you and you need to be really clear on expectations and delivery and accountability and empowerment to be really clear on what it is that good looks like.

But holding people to account on how they deliver, I can see that that's a real opportunity for business owners to lean into, to see what their people can, can do and let go a little bit because they can rise to the challenge if they're given the opportunity to do that.

But what I see is a lot of, well, I'm the best person at that job, so I'm going to do it my way.

And actually other people might have some really good ways that can complement what you can do yourself and take your business on even further.

It's a great point.

And like you say, and someone also said to me, if your business can't operate about you, then it's a job Not a business and probably good indication in some cases, places that got to have those options.

But, you know, those options, Martin, are available for people, aren't they?

We, you know, he talked about the idea of, you know, you talked about buy, you know, a property element.

And if you're selling your business, you want to be in a position where you get maximum, you know, if you've got a house for sale, you want to get the maximum value for the house.

Businesses are no different.

But you gave an example where, you know, and sometimes we'll, we'll talk about in a moment.

If you're not careful, if you haven't put certain elements in place, you could be selling your business in the way of sort of selling a house that needs a lot of work.

So you'll get a value, someone will buy it potentially, but they won't buy it for the maximum value.

So.

But there's different options available for people.

And you mentioned sort of the buy to let business.

Yeah, so, yeah.

So if you, if you've got a buy to let property and then something happens in your life that, oh, actually I've got to sell this now, for whatever reason, you know, it may be too late to organize, you know, getting the decorators in and changing the carpets and all the rest of it.

So, and so really this kind of goes to the fundamentals of what we want to deliver to business owners, which is, well, can you get your business to a place where it's like a buy to let property or even owning Tesco shares because you don't have to turn up to the boardroom and sit at the checkout and own Tesco shares and get a living from it or earn some dividends from it.

So if you can take your business to that place, ultimately Exit for us actually doesn't necessarily mean always.

Well, you've got to sell it now because you've reached your destination now.

Exit, I.

E.

There's the door.

Go.

It could mean either a full sale, it could mean a partial sale, it could be, as you said, handing it down to members of the family, or it could be holding it as an investment because actually it's generating an income.

You can be there as a mentor to the people who are actually running it and making sure it is, you know, could going to continue that income stream into later life.

So, you know, exit doesn't necessarily mean, you know, there's a sale transaction.

But just before we go into talk about valuation, because I want to cover on this topic around sort of how to balance what factors buyers Use to decide on valuation.

I think it's really important.

When I had my business, I remember my shareholding.

I remember saying to the people that, my fellow shareholders, I remember saying I was a majority shareholder, but I said, if someone could do a better job than me, it's in my interests for them to, to, to, to.

For me to step aside.

And even though it felt a bit strange when I did step aside from that business, it was in my interest to, to build, to do it.

Because sometimes, you know, we think we know it all, we think we know a lot of stuff as businesses, but you get, you know, incredible people, they've got talent and energy and drive who come in with new ideas and you.

That can take your business in a different direction.

Right, so it can make a totally massive difference to potentially increase the valuation.

Yeah, definitely.

I think you, there is a danger for all of us to think that, that no one can do the job better than I can.

Which is if you can take the time to listen to people around you, it might not be comfortable when you hear the message to start with, but actually when you reflect on it, you think, oh, actually that's a really good idea.

Why didn't I think of that?

And there's that realization, oh my gosh, there's people around me that can actually do this better than I can.

And it does take me back.

And very early on in my career and had the opportunity to become a general manager of a computer business.

And because of its circumstances, I was thrust into the position of general manager and I was like a green accountant not long out of the profession that's working in an accountancy and practice, a big one.

And that was quite scary because I'm thinking, oh my gosh, there's like a marketeer here, there's a manufacturing expert, there's a sales, you know, director, there's all these people with their specialisms.

Well, I'm the general manager now.

I've got to know everything about everything they do in order for me to be able to manage them and actually make a contribution.

But you learn quite quickly that actually I don't need to be an expert in all of these things.

I just need to create an environment where all of these individuals with their specialisms can actually outperform.

And so that is the job of a leader.

It's not to be the best person in the team to go and work the tools.

It's the best person to actually get the best out of the, you know, the team that you've got at your disposal.

It's really good point.

And I guess leadership, sometimes people do confuse the two.

They get confused into a thought process that they've, they've got to be that.

But just talk about valuation and so you know, you're an accountant and you, you know, you're proud to be an accountant.

Rightly saying, well, I'm proud to be a salespeople.

Sometimes people are a bit of afraid of proud to, you know, in this industry.

But I think you need to have those skills in a business.

What, what you know, when, what factors do you look at?

When you advise businesses now and you do and you both, what factors do you use to help companies that are thinking of buying companies to look at decide on valuations?

I mean obviously what are the key things from your perspective that you think actually these are the critical bits that you've got to get right in order to get a good valuation for your business.

Yeah.

So the truth is we don't advise much on the buy side of transactions.

We're more focused on the sell side, I should say.

Yeah, yeah.

And also so we're to characterize it for the people who are interested in this thing.

We're kind of operating in the middle of a professional advisory playing field, if I can put it that way.

So at the one end you've got traditional accountants who will be providing information on.

Here's your annual financial statements and this is what's telling you about your performance in the year.

And at the other end when you're trying to deliver on an exit plan and you've got M and A or corporate finance people are helpful in taking you to a plate in the marketing the business with a view to an eventual sale.

We're right in the middle of that and we help people on a journey to deliver them to a place where they can talk to the M and A or corporate finance specialists.

So for us there's a journey to go on on which is the three to five years but it's actually starting at the beginning of.

Right.

Actually it's not.

I've got to spend the next five years sorting out all the day to day problems and just managing the business as it is and then getting to the end of the five years and now, okay, I've done my five years now who can I sell it to?

Is actually putting in place the important factors that makes the business actually sellable.

And so we've talked about making the business not dependent on the owner.

So that's a vital thing, is to ensure there's the skills in place to Carry the business on irrespective of whether the owner's involved.

And I think as well, because people can come and go as they please, you can help help mitigate that risk by putting in long term incentive plans to ensure that those people.

And that's not necessary options, but it is an opportunity for people to participate and almost put golden handshakes on them.

But I think you can just rest on that alone.

You've got to do those other things like create opportunities for people to develop and create a bigger purpose as we talked about.

So that's really important.

I would say investing in systems as well.

So I mentioned earlier around you've got to have a significant investment and be brave to invest in financial systems.

So you know how your business is.

Performing and describe it, just describe a financial.

An example, a practical example of a financial system that, you know, let's say a business owner that's got a business for a couple of million pounds and they think, give me an example of the practical.

The financial system that you would, you would want to see in place.

Yeah.

So the first part of it is to actually assess what's in place at the minute.

So a good example was a fairly large business that we advise now doing very well, 15 million turnover.

When our relationship started with them, they were using antiquated systems.

So they had a finance director who basically he pretty much locked himself in his office and kept all of the financial data to himself.

So the CEO was like bereft of information.

So he didn't know really how he could see what was going on in the bank account, but didn't really know how the business was performing in different parts of the business.

So that's an extreme case.

But there we would go in and implement modern alternatives to that approach.

So.

So in that case we actually took over their whole financial management.

So we're able to help them, as it happened, implement an MRP system.

So that's a manufacturing planning system and gave them access to ready access.

So this is like on your phone having a dashboard of, you know, what's happening with our sales invoicing, what's our collections like, you know, what's our bottom like all of these, all these key KPIs.

Exactly.

So that is broadly speaking what I mean about financial systems is actually putting in place tools that will enable the business owners to have access to reliable information, unlike quick.

So again, another extreme way of looking at it would be in a traditional environment where I know businesses where they're kind of waiting to have a conversation with Their accountant many months after the year end.

Because the law around obligations to file information is like, well, if you file your accounts 9 months after year end, you're compliant.

Well, that's like a long time.

So it could be 21 months after something actually happened in the business, which is way too late.

So those businesses that are kind of waiting for that conversation, they're the ones that really need some help to implement financial systems so they have access to information like when it's happening.

And I guess the example of that again would be practically is making sure that you can look at the numbers, like from a sales perspective from you say, cash collections, debtor days, all of those type of key factors that are critical in those sort of size of businesses to ensure that you've got your finger on the pulse, I guess, is the element to it.

And it's not just sitting in the example you gave in someone else's office or someone else's email and that person been in control.

I always look at businesses being a bit like you said, pullback risk.

And you want multiple people to have access to information so that if John or Sally does, you know, God forbid, but, you know, get knocked down by a bus tomorrow, that the business can survive without them.

And again, that systems are financial, but they're also systems in terms of people and structure, isn't it in terms of able to ensure this continuity?

Yeah, definitely.

And I think where Martin shared the financial fundamentals there, for me to get the best value out the business, then I would put it into three parts.

So profit people and process.

Or you could do profit process people.

Some will say the process needs to come before.

Some say, Some people say the people first.

I think it depends where, where, where you look on that one.

But if you're thinking about, you know, driving income growth, where are opportunities there?

Is there opportunity for diversification in income?

Are we all channeled in one area or is there opportunity for further growth increasing?

Is there an opportunity for efficiency within the processes?

Have we continued to do what we've always done or are there better ways that we can do it by lifting the bonnet up and having a good look to see what else we might be able to do differently?

Are there some risks in there, whether that's from a client perspective or whether that is from a people perspective or even a business perspective?

Service.

What's the service looking like that we're offering to our clients?

How do we acquire them, attract them into our business?

How do we serve them when they're wanting something or need something from Us, and how do we retain those clients and keep them coming back asking for more?

And then when we think about our people and the culture and environment that we've created, are we getting the best out of our people?

And they are delivering in the way that we want to.

I think lifting up the bonnet, as I said, and looking at where's the opportunity to drive the profit upwards through income, sales and so on, how do we make sure our people are feeling fulfilled and they've got the opportunity to grow and learn?

And then what are those processes that make us slick and stand out from the crowd that we maybe need to change because we might.

Might want to stick to what we've always done because it works.

But how do we really challenge ourselves to look at.

Think right, okay, this could be done differently if we really take a look at it.

And I, and I think sometimes we can be quite reluctant to do that.

And you need to be brave.

It's a really interesting challenge.

I remember thinking about a challenge that I had around when I think back to my business as well, of, you know, when you look on, you know, I love the three Ps, profit process and people, whichever order you have them in.

But sometimes that challenge, when you do open up the bonnet and you look and go, oh, someone, especially in a company and you've got other things to do as a director or a leader of that business, you look into and go, well, that's not been done the way I wanted it to be done, or that person hasn't done things in a way that I wanted them to do it.

And actually I then go back and say, well, why is that the case?

Well, it's because they didn't follow a structure or system that you gave them in the first place.

Yeah.

So a lot of the time, it's all about the early stages, is about embedding people to do the.

What you want them to do, that process to follow.

And yeah, I always use the airline industry as a really good example of this.

You know, every airline around the world has the same practice to be able to indicate the.

The emergency announcements when they do the start of the plane.

Whether it's, you know, Turkish Airlines, Ubekistan Airlines, British Airways, American Airlines, they all pretty much do the same thing.

Here's the exits.

And that process is the same because it's been growing into them for doing it.

And I guess it's having those elements in place, but without making it a machine.

But making it a machine.

There's no.

Yeah, I worked, had the good fortune of working with an entrepreneur and I actually still work with them now and I was appalled actually when I first started working with them because they made reference to wanting to be successful despite people and I thought, oh my gosh, that's just awful as a culture setting and nobody.

Yeah, I mean I'm not sure but actually having thought about it it afterwards, what he actually meant was I need to put in place systems so that people that are here can actually perform and do a great job consistently.

So your point about.

Yes, well, financial systems is actually one piece of it.

You actually need a set of systems which you can articulate probably in writing in your internal.

The brain of your business if you are like to your people in a coherent way and so that you're not in a place where you're so dependent on your people that if they walk out the door then you've got a major exposure in delivering continuity and growth.

Actually someone else can come in with a level of training and actually pick up where the last person left off.

It's so important.

And that knowledge sharing is critical, isn't it?

It's that element of being able to.

The sort of sharing the knowledge.

There's the, there's the what we do and how we do it that in companies in a way, if you could bottle that in or structure that so, you know, this is how we deliver our services, Company X and this is who does this and what we do and it's putting that together so they give this incredible service every time.

But it's not done by robots, isn't it?

It's that balance between the two.

Yeah, yeah.

You do need to harness a level of creativity.

So you know, you need a framework for people to operate in.

But also I believe in a level of autonomy to perform.

So if you create that structure there's still scope for them to one enjoy what they're doing.

That is the scope for them to develop but also to actually input their creativity on what you're doing and with the ultimate aim of great client service and ultimately great value in the business as well.

Yeah, definitely.

I was just going to say if you talk to some of the most top performers, advisors out there and you say, you know, how is it you do it?

They'll, they'll say I don't know, I just do it.

But they follow a consistent process with their own personality and skill set every single time because it is consistent and it works.

And I think sometimes we, we may have specialists out there as business owners that have been successful in.

They've Always done it naturally.

And they haven't necessarily recognized quite how brilliant they are and got it down into a process and expect people to, well, I can do it, so why can't you?

So helping them with a framework in this is how.

And then you put your own personality around that I think is really key.

I think.

I mean, I talk to people a lot about the sales part, as you know.

You know, that's exactly what we, the business.

The work that I do is helping companies do that.

And it's that aspect of being able to take out stuff that's in the brain.

I mean, I was talking to a friend at the moment, there's so much stuff in his brain and he's like, I want to get my team to be able to do it that way.

And I'm like, okay, right, but it's in your brain and we have to be Yuri Geller.

We can't read your brain or read mine.

Therefore we've got to take it out.

We've got to create a playbook, a blueprint that enables us to follow a structure over a period of time that can then enable the team to follow that and say, okay, and I know what I've got to do.

And they're going to make mistakes along that route.

Which is why a lot of business owners give it up.

Oh, it doesn't work because they didn't do this or no, actually keep the face because if you're the only person that knows how to sell your service, then unless you teach X amount of other people to do it, you're never able to create this engine that goes on without you.

And I think in that case as well, the other thing I'd say about the exit side of things, if you, you in most again, product or service, if you're a service business, if you haven't got a clear pipeline and engine of the next 12, 18 months, two years of where your growth and your revenue growth is going to come from, then you're going to potentially undervalue the business and you're going to.

And someone's going to look at that business and they're going to go, well, it's great that it's got what it's got right now, but I'm buying now.

I want to.

People want to buy the future, they want to buy the what the opportunity is.

They don't just want to buy the current.

So they're going to look at it and go, well, you haven't got an engine, you haven't got a, you know, a proven Funnel of where you've shown that you can take leads, you know, 100 people from here, from top of the funnel to 25 people at the bottom.

Okay, I'm going to discount that.

So building these structures and to your point, these three engines of profit, prices and people, but these three things that are going on in the business day in, day out, that will operate it and run it, that make people and go, well, I don't need Martin, I don't need Caroline, I can't.

Can take the, take them out of the equation and I've still got this great business, isn't it?

So absolutely.

So just talk about the, the idea of, you know, where business is in valuation.

Because valuation is obviously an interesting thing and people always get very emotional about valuations, don't they?

It's the, you, it's the most emotional part of a business, we all think, you know, would you agree with me, Martin, that a lot of business owners tend to have these really wonderful valuations of their business and reality, it's, they're never quite as, as, as big as they think.

I mean it's probably fair to say he's a bit like the fisherman is I caught a fish that big.

It's probably only that big.

Right?

Yeah.

In some cases that fair.

Yeah.

And I think, you know, that is the tendency.

You think, well, I've spent a load of time actually building this and spent a load of money on it and therefore because of that it must be worth something.

Well, unfortunately it doesn't work that way because you might have actually spent a load of time building a house and it's actually now four and a half down.

And so therefore it's not worth anything.

All the land is but it's value.

Exactly.

So that, you know, there is that danger.

But as we've said, a business can actually create value if it thinks about all the things around the systems.

We are becoming independent, creating a level of security and it probably makes sense to just share with people, you know, how business valuations as a mechanical exercise typically happens.

So very often for SMEs, small medium sized businesses, they will attract a value which is based on their sustainable earnings.

So as you rightly say that those earnings become interesting when you actually look out and see what lies ahead.

But that has to have some basis in reality and that reality includes what's happened already and do you have a growth track record of delivery?

So I would say you've got to.

Again, it comes back to that window of time allowing the three to five years part of that three to five years is one creating the machine or the engine you talk about, but also having time to us demonstrate that that engine is actually working pretty effectively.

It's not just come off the factory line, it is actually going around the circuit.

Well, absolutely.

And then back to systems, you know.

Absolutely.

Right.

I'm always willing to pay the financial systems card first given my profession.

But and you yours because you know.

Absolutely.

You need a sales system that actually is demonstrable.

So you know, because that's what a buyer is going to be really interested because they can see, okay, fine, you've delivered that track record of growth.

What, what is the future potential in this organization and do you have a machine or an engine to actually deliver on it?

Yeah.

And I guess the other things around valuations, people talk about, you know, reasons, how people buy and obviously depends on the business.

Right.

Because if you're in a, you know, there are some businesses that, you know, people used to look and say Facebook bought WhatsApp for 22 billion years ago.

They didn't make a pound of profit.

So of course there are unicorns and different elements to that.

But in general most businesses are being bought based upon either the turnover of the business stroke or the, or the profit of the profitability of the business, aren't they?

And yeah, there are valuations around the amounts of that.

But do you want to share anything specific around sort of some of those thoughts?

I'm slightly cynical about it because there is a mathematical equation that we can go through which is, well, valuations are based on earnings before interest, tax, depreciation and amortization.

Happy to explain that further if you'd like and then a multiple so you can do great science around, well, how do we get to our actual earnings figure?

So that's both what's happened in the recent past and what we expect to happen in the future.

So that's reasonably certain provided you've got a good sell system behind it and you can support your numbers.

And then there's a factor which is what's referred to as the price earnings multiple.

So how much do you multiply that first figure the sustainable earnings buy to get to a valuation?

Now that's where it's like, I feel like smoke mirrors to an extent.

But that multiple is actually affected by a number of factors including, well, what does the future projections look like?

Is there an opportunity for exponential growth?

If you have.

So going back to your Facebook example, you can push yourself up the multiple curve.

But typically a maturing small medium sized business is likely to have a single figures multiple probably somewhere between three and seven times your earnings.

But having said that, I've worked with a business that in recent past has actually achieved a 30 times multiple for.

But yeah, that's towards the Facebook model where they're kind of early life but actually they've proven, you know, what lies ahead and you know, a special purchaser has seen the value and I think.

That'S always an interesting point around, you know, go back to, you said a special purchaser.

So the, you know, the example being is that if you've got something that someone else wants then ultimately the price goes up.

Right.

Because it's sort of like it's everything but you know, we'll, you know, whatever we've, you know, whether we're selling a pen or you know, if someone wants that item and they, they see it as being crucial to their strategic direction or their value or what they're doing, then they're going to, they're going to want to look at it I guess as something they want to acquire.

And if they've really believe it's, you know, the world's going to, let's say they think the world's going to go this way and they want to bet their house on that, they're going, you're a key provider in that space or you know, a solution in that space then could well be that that's probably what happened in your case of your 30 times multiple.

Right?

Yeah, and yes, exactly.

And I think it, it actually speaks to again this whole idea around planning early because part of it actually when you're thinking, right, if I, if I buy into this idea that I'm actually going to build a business to exit.

So this is, you know, we focus on exit because it's not necessarily selling.

You should have half an eye on what, what your personal exit looks like.

Yes.

And that includes actually identifying who is going to buy it because that potentially is going to shape well what, what would a business like that value?

What do they want to see?

So actually that's my vision.

I'm going to go and create that model and that will put me in a position of having an option to sell.

So a business like that.

And it's also interesting, I mean something to pick up on currently because you're especially in the background of financial management which you guys, people that get the money and they do something, people always get a bit confused.

So let's take a practical example.

You know, let's say you've got a business at the moment, I Don't know.

Let's say you're doing 5 million pounds a year.

Okay, they're doing 5 million pounds a year as a business.

And let's say it's a really well run business and the business is in a good industry, it's a good space, a good track record.

You know, they've got, maybe they're making their margin of 15, 20%.

Let's say they're making a million pound.

Yeah, but for your, your numbers people, I'm the simple, simple words.

They're making a million pounds a year profit on a five million pound business and they've got some of those systems and structures in place.

The business owner can go off without necessarily feeling that, that they have to be involved in every decision.

From what you've just said, you know, someone, if they're in a strategic area that's of interest, someone might look at that business and say, okay, this is interesting, I might be able to be in a position once I, you know, look at 1 million pound, okay, it could be worth, you know, you just said between 4 and 7.

So a business owner might say, okay, I'm going to get, let's say between 4 and 7 million pounds.

Could be higher, could be lower.

Obviously depends on the business.

But that's sort of the rough element of it, isn't it?

Right.

And so, but, but a lot of businesses look at it and go, well, surely my turnover is more than 5 million, so why don't businesses get bought based upon turnover?

So is there anything particular that you wanted to just mention around it?

Because people said to me, well, should be worth 20 million because I've got a turnover of 5.

But businesses generally don't get bought based on turnover.

Well, some do.

Some do, yeah.

So there are sectors including service industry, so you know, pharmacy, accountants, there are businesses where turnover is a significant factor.

Factor.

But despite that being a significant factor even in those trades, there is still a sanity check.

What is the ebitdar?

And it'll be multiply that by three to seven or four to seven.

Does that reconcile with our metric around turnover?

But you know, but there may be some motivated buyers out there, there that are actually interested in adding turnover because they, you know, they're in a position where they need to report to their stakeholders that we've actually, one, we've invested your money and two, in good places and look at our growth in, in revenue.

So there, there are, you know, that, that is one potential argument.

But going back to the, you know, special circumstances and you know, that particular client I was referring to, you know, their special scenario was, well the acquirer was actually a financial investor so it was a private equity house.

But they were already invested in a similar software business.

And so actually acquiring this business enabled them to, okay, there's synergies and actually we can get an exponential return by bringing those businesses together because they're growth opportunity.

But obviously that was backed up by having thing a good sales system and a good, good handle on what the future look like for the independent business.

So I wanted to interrupt the podcast just because I want to ask one small favor.

If you really enjoy the podcast, could you do me a favor and just give us a review?

Just head on over to your podcast network and just basically put it in a review and tell other people what you think to it.

Now back to the podcast and I guess when it comes down to the business owner and sell it.

And the other thing they've got to take into account is, you know, they see a figure but then they go, well I've got to take tax off that.

I remember the person that I spoke to who sold his business was literally, remember he said to me, he remembers writing the checkout to HMRC and it made him cry basically.

And who knows whether this podcast will come out.

As to whether those numbers are going to change, I think they probably are.

So that's something for me to think about as well, isn't it?

Because suddenly, you know, a large percentage of what they, they think they've got the value for gets taken away by the taxman.

Yeah.

And I think that when you said, you know, well oiled machine this business is, you'd go question, why do you want to sell it or exit from it?

Because you might want to, to just take a step back.

So I suppose it is why, why the sale, why the exit and what next?

So is that to create liquidity to build something new or is it to retire?

Going back to your question around that big tax bill, there's no point leaving it until the year that you sell the business.

You need to be taking action on good financial decisions throughout your business journey every single year.

Maximizing tax efficiency with a build up to then exiting your business.

Because we can't mitigate tax, but we can maximize the efficiencies along the way.

Spreading that over the term of your business is really key, which is why.

You guys are such a awesome combination as a team really because you've got that financial management, personal financial experience of managing and whereas planning, whether it's done through the element of making sure.

That if I, you know, and I am going to sell this business that I'm going to pay what I need to and not pay what I need to is probably a fair way of describing it.

But also then having that business side of things to make sure that the company can get the maximum valuation.

So that's why 55 Financial, I guess it's for you guys this way, it's that helping business owners on that journey to be able to say actually if they are thinking about that in two or three years time and the bit I can come in, I'll help with the sales bill but let these guys do the rest of it.

But if you are on that journey, it's plan it effectively, make sure you know where you're going to get to and then go and implement that, that plan to get to a point where in three years or four years time you've got that you've got the end reward for the work you've put in, I guess, isn't it?

Yeah, yeah, I think I ought to contribute on the tax side of it.

And I would expect.

But yeah, but yeah, my view is, and it always has been not just managing the tax position of an exit, it's actually the whole tax position over the business journey as well.

And I get frustrated when people come to me and they say well, I'm paying too much tax or actually I want to focus on getting my tax bill down because to me that's actually focusing on the wrong thing.

And yes, of course, part of our, our proposition, our service to our clients is actually to help ensure they pay no more than they should do.

But our focus is, look, the big prize is actually making your business into something of value.

Yes.

Because that's going to be way more important than you tweaking around trying to save a few quick attacks on the on the journey.

So Caroline's absolutely right by planning early there are things you can do to mitigate tax and even now, and I suspect, expect and hope it will survive the next budget, there are opportunities to actually get that and see a capital gains tax bill if you are selling and down to a lower amount compared to the equivalent of income.

Think of time.

It's this great conversation but I'm conscious we can go for a little while.

And these conversations flow in such great different directions.

So I'm thinking we've got 10 minutes or so left before we finish.

If someone's listening to this right now and it's thinking, okay, I've got a good business right now, it's A decent size and I, I am thinking about, you know, their future and maybe they're, you know, at an age where they're thinking they want to do other things with their time or they're thinking that, you know, that this made life isn't just about the business that they've had.

What would be the top two or three things that you guys would, would be saying to them right now to think about?

You know, it's not right, they're not doing it today but they're thinking about it as being a couple years time.

But we always put those things off, don't we?

Unfortunately we don't think about the stuff for two or three years time.

Or should I say about my knees?

I abused my knees by football years ago and now I pay the penalty.

So what are the things you'd say to them right now that they can put in place to try and achieve that right return in 2, 3 years time?

For me it's about nailing down the plan.

So what's the vision for the business and where you're going to take the business to maximize the exit value you and what is the vision for the business owner personally?

Because it's really important to make sure that those plans run concurrently and then you've got something to that you're heading for after the business exit and then it is so thinking about when that might happen.

So it could be two, three years, could be five years time and then what's the, how are you going to make that happen?

So what's the strategy?

What are the areas of strengths right now?

What are the areas, areas of direct development that you can be focusing on from a profit people process to really maximize that business growth.

So the plan for me is absolutely key.

Being clear on your goals and what the path is that is going to enable you to get there and also recognizing that there are people out there that can provide professional services that can help you with that journey.

Because sometimes I think we expect ourselves to know all of the answers and we all have specialized areas and we need to pull upon those specialised areas to make sure that we maximize the outcome that we're looking for.

It's great point and looking for your takes.

Yeah.

So there's two words for me.

One is focus on the outcome and two, just start so outcome and start start so outcome.

What I mean is, well here we are today and if we accept that probably the journey is going to be three to five years unless you've done all those foundation steps already and you're ready, you're ready to go and speak to an M A specialist.

What in your utopian world, and a very good friend of mine used to say, what's your FA cup moment?

You know, what's it, you know, what is it it, you know, to lift the trophy for you?

What's it going to look like?

And it's probably easier for people to kind think around what is the financial outcome that would actually, you know, put me in a position where I can be financially free and you know, and open up options in my life to do things, you know, some of the things that Caroline was talking about earlier.

So I think that is important because I think when you get closer to realizing the outcome, there is, you know, a danger because, you know, going back to the property analogy, there's a tendency to think well I want to get the maximum price for this house.

But actually, you know, maximizing, maybe actually exceeding what you actually really want to achieve.

So you could be thinking well I don't know what the price is because I just want to get the maximum.

Well, that's not very helpful.

So I think it's important to start that three to five year journey with.

Right.

This is what I'm aiming to as an outcome.

And then the other point is well start because actually it is a three to five year.

I mean.

Yeah, we talked earlier about dependency.

Even if you've engineered brilliantly your business to a place where it isn't dependent on you as the owner, the chances are a buyer is going to want to mitigate their risk.

And having the comfort blanket, if you like, of having you around for a period, period is likely to be something they will want to negotiate.

So you better start because actually, you know, this is quite a long time.

It's a long journey and to get.

To your three to five years could turn into seven to nine years basically.

On the, on the, on the elements of it being.

Yeah, just one point about advisors because you mentioned about advisors.

Yeah.

How important are good advisors and good, you know, legals and you know obviously people going through the selling process.

Do you.

I mean obviously, obviously that's, you know, there's advisors to get to that point and then there's the M and A people and the people to actually get it done.

But you know, advisors are critical in this process, aren't they?

And actually I would even argue confidants as well because I think you can have some of the advises on the numbers and the facts and the figures but actually you also need someone to be able to be that and call it coach but that personal person be able to have a conversation about what feels right in your gut feel.

Would you both both agree that the instructor the importance of advising is critical.

I've observed a very, very good friend of mine go through a business sale very recently and the amount of stress that it caused her was as a result of maybe a lack of collaboration through the professional advisors.

So choosing wisely is absolutely key.

And I suppose just to add another point to the exit planning, I think we've talked about, you know, a longer term but what has come out to me is yes, you're looking at that exit figure financially, but it's also really important to remember, you know, the freedom with your time, financial freedom is going to be really key for people because they want that ongoing security.

But thinking about what your purpose, where is the fulfillment going to be for you moving forward?

These professional services that are available out there not only can help you with your financial freedom or your business growth.

Also from a personal perspective, there's support available to take you through that journey too.

Yeah, it's vital to have great professional advice.

And I think again one of my learnings from being in business is and I guess it's accountancy training.

Weight is well actually that's a lot of money to pay for lawyers or accountants or specialists.

But actually you have to think of it as an investment towards this outcome because those advisors and it's also equally important to get them in early because you may not actually have all of the answers to how to get your business to the place where you want it to be.

So you have that option, that exit option and tactically speaking, so one get them in early because actually they can help you on that journey and prepare you.

So even lawyers, for example, you think, well actually they'll come in and help me negotiate the T's and C's of this transaction.

Getting them in early in the process is actually a really sensible idea because I'm probably looking two years out from the actual exit point because they can help you get some of the legal process disciplines in place because that will form part of the due diligence process you'll go through ultimately and then equally having someone who's good on the corporate finance or as an M and a specialist to help you through the negotiation.

Because if you're a big enough business to be selling out to a large organization, the chances are they will have either in house corporate finance specialists who like do this stuff for their day job or they're advised by the likes of PwC and these guys will scrutinize and they know what they're doing.

So it's equally important for you to have somebody on your side working through those things.

I talked earlier about the company that sold 30 times and just thinking about their outcome, they'd shaken hands with their boss, buyer, an investment buyer, and this was going to mean an eight figure sum to them.

And actually in the final analysis the actual receipt on that transaction was 10% higher than the eight figure sum they'd shaken hands on.

So you can imagine they were quite pleased.

And that was because they'd actually chosen to actually work with experienced advisors so openly.

Absolutely, really, really important, important.

And you mentioned about starting, I guess the key thing start because a lot of businesses might say, oh, I don't want to bring expensive consultants, really, you know, people are going to charge me a fortune to do things.

But actually part of that is like you say, it's an investment, isn't it?

If you want to get to that end point, you've got to start by now and looking at the parts of the business, the parts of the three Ps yeah.

Aren't working right now for you in terms of, you know, I have three P's and an S sales as well.

I always got a new boat that's from sales.

I'm joking.

But those three Ps are starting to say, actually let's get an independent eyes in to come and have a look at where, where, you know, maybe where compared to your other people in your industry that have been sold of a similar valuation, you haven't got things in place what, you know, basic on this.

I mean, for example, one of the things I was, you know, was taught was just have a folder of all the relevant documents of insurances, of contracts, of all of the stuff that people don't think is valuable.

But actually it should be a folder where if someone could come into your business, they could see a folder straight away and say, all right, all of your customers are on contracts for the next two years and there's all the contracts signed and up to date.

Yeah, that's the sort of stuff that a lot of people just don't think about.

But actually that's the sort of thing that buyers, when they start going into the nitty gritty will then start chipping.

Away at prices or definitely and I would say even something as simple as language as well, it's something I've been picking up on in different contexts.

But actually a good M and A advisor will help train you to use the Right.

Language when you're speaking to professional purchasers, whether they're in house corporate finance or.

Or the likes of PwC, as I said earlier.

Yeah, definitely.

So look, we could be talking all this all day, but we're going to run out of time, unfortunately.

But there's loads of questions we've ever even covered, which is a shame.

But we'll have to do this another time as well.

If people have found this useful, do let us know in the comment section as well, please.

As always, I say to people, if you find this useful, then please.

Because getting people, experienced people such as Caroline and Martin together takes a bit of time.

We're always happy to do it.

Final sort of question for you guys then.

So if, if someone is thinking, no, we've done this work, we're in good shape, we've done our planning, we've.

We know what we vision.

I know what my vision is and I want to, to go make it happen.

What do they need to do really?

What's the.

What's the process and how long should it take them?

Martin, what would you say?

I mean, is.

What's the.

If they've got all this in place, I guess it's could take, I guess as long as it takes to get the business valuation.

But what's their next step, really?

I guess, yeah.

So if you are in that place, then, you know, clearly going back to the point about advisors.

Yes.

Yeah, it's probably time to consult with an M and A.

But yeah, I think it's important to have an understanding of what that process actually looks like because an M and A specialist may be involved in the marketing.

So that process might be evaluating who are like trying to.

Facial sitters.

Yeah.

So there'll be a process then of.

Okay, fine.

Well, we've identified who our target audience might be and then you need to articulate the message, probably in a teaser format to start with, to gauge what the interest is out there and then end up with a shorter list of candidates that will receive more information in the form of a document, probably referred to by the M and A people as an information memorandum.

But it's basically articulating your business story and.

Yeah, absolutely.

And then you'll be in a process of, well, establishing whether there are still interested parties.

And if they are, they're going to maybe make an indication of an offer at that stage or require a presentation probably from the team.

And this goes back to that point about, you know, is it dependent on you?

So great.

If you can have more people in the room Room to demonstrate that actually here's the people that are really running the show.

And then if you get to that stage and the buyer is still interested and they've, you know, confirmed their intention to purchase at a price, then it is unlocking the arduous, potentially arduous process of due diligence, which will be both financial and legal.

So you're going to have lawyers spending a lot of time drafting documents but actually looking, looking at what is the risk position that this business is in.

Are there litigations, are there employees disgruntled or running off?

And those guys are generally looking for flaws.

They're looking for flies in the ointment rather than the ointment need to be beautiful, aren't they?

Yeah.

And it's again back to the property analogy.

You put your price on the right move and maybe you're expecting not to achieve exactly that price, but something the blur.

So actually you go in with the expectation that a buyer is going to look for opportunities to knock you down.

So yeah, so that, that, that is potentially you.

Yeah, it says every situation is different.

Of course, you know, because I have seen it where in our own case actually we, you know, we completed our transaction from the first conversation and this was actually during COVID and so first conversation in August and you know, we probably should have completed before Christmas, but Christmas kind of got it in the way.

So we shook hands and very beginning of January and that 30 times multiple business, you know, something to do with its special interest to the acquirer.

That transaction was completed within five months from first conversation.

But that, you know, I don't want to leave people with the impression that actually is a zone five month or six month exercise job.

And actually.

Yeah, and that exercise is going to be really intense and you know, there's going to be a load of questions.

So you've got to have your ducks in a row.

I think it's a great point.

And you know, just to finish off, you know, that element of, you know, you're taking those two business which were relatively as well as you've described it, not as complicated as others took, still could five months.

So this journey you've got to go on and I guess goes back to the people element around the reason why you're selling.

If your reason why is it strong enough that journey can, you know, I've known a few business owners that have literally walked away from the process and said, can't be bothered with this anymore.

And I had one guy I spoke to who literally got in the room and the due diligence team tried to chip away by around about 40% at the number that he was offered and he was like, get out of the room, I'm not interested, and walked away.

And there are different tactics, hence why good advisors are.

So those are high risk scenarios and it is a game.

And buyers will typically, if you get yourself into the place of a preferred purchaser, for whatever reason that might be, it's likely because a buyer doesn't want to commit expensive.

They engage PwC, for example, they don't want to engage them and expensive lawyers on a due diligence exercise if they're not going to be the front runner in this transaction.

So they're very likely to insist on a period of lockout.

So exclusivity.

So you have to kind of.

If you're at a point where actually the final.

We know we thought we'd shaken hands on the number and now you're telling me it's a 40% less number.

Remember, you've actually probably invested a lot of time on your own side as well in experts.

And now you're actually.

So at that point, really the tables are starting to turn in the favor of the buyer because actually are they delivering on that?

And you know that utopia that you'd kind of like dreamt about at the beginning of the process.

It's there, but actually it's not quite as much as I think I can get out of it because.

And I thought I was getting out of it at the beginning of the process.

Yeah.

Which I guess goes back to the whole point of.

It's this whole process.

If you're going to do it takes time, it takes work.

It's like getting the right expertise in.

So I guess that's leaves me final to sort of talk about you guys.

That's where.

So how can people, how can people reach you?

Because if they listen to the great wisdom that you both have shared today and they think, well, actually I'm intrigued about helping my business to get to that point.

I guess the best place to reach you is your new website, which I know was launched recently.

So you mean.

Or basically on LinkedIn how.

What's the best place?

You mean guys, Caroline's out.

Where the best 2 people reach 55.

Financial is our website and you can book a consultation with us on there or alternatively you can find us on LinkedIn in.

But my final point would be we've all got a choice and we can go it and do it alone and recognize what we've achieved and get to our next point in life or we can choose an easier way.

So we're here to help.

Yeah, amazing.

And it's been great to meet you, you know, over the last couple of months and talk about the plans that you have and the experience and what you guys have got and I think you know, getting to that point point of you know, building a business a value of exit and you know, I think that's the key thing, building something of value.

You want to have the options then to do what you want to do.

And I think you both have got huge knowledge experience to help business owners do that as as well as myself in helping them drive that sales number through as well.

So hence why they're.

We are thinking by the way actually if you listen to the podcast and you're interested in we think about doing some other stuff as a follow up from this.

Maybe some workshops or some, some, some webinars.

Webinar.

I was a bit old, the world's got bit bored of webinars.

But the idea we're looking at doing some stuff that if you're a business owner listening to this thinking I'd love to dig into this a bit more then we're looking at some options around helping people build their engines, those structures for, for to achieve the exit that you want.

But I hope you've enjoyed the podcast.

Big thank you to you both for your time and knowledge and expertise and sharing so frequently and so honestly where you know, thoughts today.

I, I find it really intriguing myself.

There's lots of stuff I've, you know, I know about this process even though I've learned I love the, love the three P's, the profit people.

I think that's a brilliant way to look at things and I love the elements of what you've all talked around that time frame.

This takes work.

If you are a business owner listening to this and want to get the maximum value for your house.

I love Martin's algae about the house and to build the maximum value for your house then you've got to put the right steps and start now because this could take some time.

That's it for this episode of the podcast.

Thank you both.

Really appreciate, appreciate it.

Thank you very much.

Well, we'll see you soon.

People can connect you on LinkedIn.

We'll provide all the links to Martin and Caroline's LinkedIn profile and also to 55 Financial in the podcast links.

So thank you so much for listening to this episode.

I hope you've enjoyed.

If you have, please subscribe to the podcast.

It helps us ensure more people can get the insights and ideas they need to get incredible sales results.

Look forward to seeing you on the next episode.