Coalville Business Services Ltd

Which is perfectly possible…in fact, at least double

Really?

Yes, because if yours is like most owner-managed businesses, it’s run as a personal cash generator and lifestyle support scheme. This is fine until retirement looms or a divorce or partner dispute arises, or an unexpected offer is to buy it is made.

One of these events will definitely happen to you one day and when it does, will you be in a good place or will you be one of the 250,000 small businesses that close every year with nothing to show?

‘Be Prepared’

“a Scout must prepare himself by previous thinking out and practising how to act on any accident or emergency so that he is never taken by surprise.”

So said Robert Baden-Powell, founder of the Scout movement and victorious army general.

Because lives depended on it.

Today, it’s Bear Grylls saying it as Chief Scout and lives still depend on it as his TV exploits show.

And as a business owner, your lifestyle and security depend on you being prepared.

So, how could you make yourself ‘prepared’, without a load of hard work, more cost and going short on personal income?

Well, let’s say your business is worth £50,000 today but could be worth £500,000. And the gap could be closed within 3 years, would a little of that be a fair trade?

Assuming yes (on your behalf) let’s take a look at how big businesses manage to achieve and maintain such high values to see if we can imitate them economically…

The average big business sells for 14x pre-tax profits. Yet I have seen small businesses making £50K pa close down for only £50K instead of selling as a going concern for £500K+

If you were buying a business, you would look carefully at everything before deciding to make an offer and every time you found a shortfall in some aspect you would make a reduction in your offer because that is something you would have to invest in fixing, post-acquisition.

And if there were a lot of these, you would walk away because of too much expense, hard work and uncertainty.

This is why I have seen business owners failing to sell such a business, even paying to get rid of it, having so loaded it with problems through 30 years of lifestyling that it had a negative net worth on sale day.

No one would wish to be in such a place, but many are.

So, let’s see what we can learn from the big businesses that have such high values and make their owners rich.

I’m struck by how many of the business owners that I meet don’t consider this. And when I raise the subject, they will usually tell me that they are relying on a private rental property and a modest pension for their retirement.

They don’t see their business as a saleable asset but as a source of cash flow that will have no value when they stop work.

And so often when I look at the financial structure of their business its only assets are the debtor book, (some of which isn’t collectable), creditors about the same value as the debtors, some cash in the bank, and equipment and stock which would fetch less than book value if sold off.

So, it’s true, such a business is really not saleable, just something to close down and walk away from, as do 250,000 other UK small businesses owners every year for this very reason.

But most could be sold for a six or seven figure sum if managed differently.

And such an amount would transform the owners’ retirement finances from ‘getting by’ to luxury.

Yet I get strong objections to that proposition such as “this business is all about me, so it isn’t saleable”

I strongly disagree and put it to you that any and every business is saleable

How?

Well, it’s instructive to first look at big businesses which are all about money and ROI to see what they do. Not to be as ruthless as them but to learn for free what you can adapt.

Here is what they do (just in their financial management stream – there are 4 others*):

1. Measure financial performance constantly, comparing each month of this year v the same month last year to understand what’s happening, why it’s happening, and to devise corrective action, while there is still time.