The first question that arises when an entrepreneur starts to consider the future of his or her company is to decide when to make the decision
For most entrepreneurs, at some point in their career, the following three questions tend to arise: how do I consider the continuity of the company, what are my reasons for selling or giving continuity to new generations (if any), and when is the best time?
The reasons for selling seem obvious, but our experience shows that the motivations are diverse and economic valuation is not the only aspect that entrepreneurs take into account. There are others that are just as important, such as a change in lifestyle, retirement, the opportunity to reap the financial rewards of their work, the interest in starting other businesses, and even the motivation to strengthen the company. Some of our clients’ reflections are an example of this:
We received a good offer and I thought it was a good opportunity to leave the company in better hands, as well as an advantage for my workers.
Álvaro Rocabayera. Founder of MSS.
The deal would allow the Infranor Group to reap the rewards of many years of experience and significantly improve its position in China, a country that promises strong growth, through a respected partner.
Nicolas Eichenberger, CEO Perrot Duval Holding – Infranor.
I believe that an entrepreneur’s motives for selling his company are never just one, but a set of motives. Among them to put an end to the usual conflicts that occur between the heirs of a company when the founder retires.
Daniel Loscertales. Ex-CEO Sepin Editorial Jurídica. Statistics show us what entrepreneurs tend to end up doing once they have sold their company:
- 6% take up a new position (consultant/adviser, teacher, etc.).
- 13% start a new business.
- 25% continue to work full time with the new investor.
- 31% continue in the company as an external consultant.
- 25% full retirement.
In any case, the first question when an entrepreneur starts to consider the future of his company is to decide when to make the decision.
Perhaps at the moment they start to consider this question they are not thinking of selling the company, but it may be an option that cannot be ruled out in the short or medium term. In this case, these would be the actions that AddVANTE would recommend you take to prepare for that moment:
- Make sure that the company is moderately tidy. It is particularly important that your financial statements properly reflect the state of the business and are properly presented. It is also advisable that anything that does not have to do with the day-to-day running of the company is not part of the financials. In general, a potential buyer will want to see a growing operating account and a healthy balance sheet, with no surprises.
- Also make sure that all promotional elements of the business are up to date, and if possible improve them.
- Reduce your level of involvement in the business. Ensure that your management team can manage the day-to-day running of your business without your continuous supervision. Focus only on the strategic aspects of the business. Identify who would be a good successor. This will be key in the negotiation, so be prepared.
- Focus all efforts on sales and EBITDA growth. If possible, improve your international sales, the recurrence of your sales, build the loyalty of your key customers, etc.
- Collect all contracts related to the company, especially with suppliers and customers, and update them.
For those entrepreneurs who are currently thinking of starting a sale or purchase process, these are our thoughts:
- Large corporations continue to have high levels of cash which now allows them to access more affordable targets, depending on the sector.
- Interest rates remain very low, making project finance more accessible and encouraging project finance decisions.
- Mergers and acquisitions continue to be the fastest growth strategies, which is key in a fast-moving world.
- There is high demand from investment funds for interesting, resilient and well-managed companies.
- If you have received an offer now that matches your expectations, it will not necessarily come back in the future.