First task – plan an exit strategy!
Adrian Kinnersley, managing director of Twenty Recruitment, discusses how best to plan an exit.
It might seem strange to start planning a business exit strategy as soon as you launch a new company, but at Twenty that’s exactly what we did.
It’s hard
work building a successful, valuable business and the ultimate reward is to
sell it and enjoy a high return on your investment. Furthermore, people who
build their business with the aim of some form of transaction to change the
ownership have a fixed goal right from
the start and that is to have the right people and processes to enable the
company to expand into a highly profitable entity.
This
approach takes into account the fact that the founders may not be the right
people to expand a business further once it has reached a certain size. In
every company, there comes a time when a new perspective is required if the
business is to carry on moving forward.
But how do
you go about building a business that somebody else is going to want to buy? There’s
a lot of competition out there and your business will need to be something
special if you want to walk away with a decent ROI.
We hear a
lot these days about the benefits of strong brand management and this is
vitally important if you plan to sell off your company. Get out there and get
noticed! The web and in particular our love for social media, has opened the
door for industry experts to get heard quickly and easily by a worldwide
audience.
One of the
most valuable assets a company possesses is its workforce. Deciding on the
culture and values of the business right at the start ensures that everyone
understands the support they will receive to develop their careers. It’s also
worth considering a share option schemes as incentives to encourage employees
to help build the company into a successful entity.
Back office
staff are just as important as those on the frontline. Companies will not
prosper unless they have strong financial management. A prospective buyer will
want to look at budgets, cash flow, forecasts and other financial
documentation.
We’ve more
on planning an exit here.
Interesting piece but if I were in the shoes of a potential buyer for Twenty in a few years, I am not sure the strong media presence, a happy workforce (that buy into values set out by the leadership team) and a strong set of accountants would make me want to buy the business.
ReplyDeleteMy concern would be that with a 'for sale' sign above the door, you are attracting a certain type of person to work for you i.e. one who wants to be part of a business that is going to be sold and get some reward as part of that. Some will stay, some will leave (as is the nature of the sector) but the reality is that senior management / shareholders will be the ones who a) get the true reward of the sale and b) will look to exit at the earliest possible opportunity as part of the deal. You may say this is not the case however, there isn't too many examples over the past 10 - 15 years in recruitment where the main shareholders have sold and then stayed past their earn out period and any sensible buyer will be aware of this.
The staff with options worth 5k / 10k / 15k etc are usually tied in to shares in the new business or are only able to cash in their existing shares 2 or 3 years after sale which is a long time to wait for a lot of people especially when most think they will get their payout on day one of the business selling which I would imagine causes a lot of headaches for the new owner.
If they get over this hurdle, new management inevitably come in with a new set of values / way of doing things - this can cause disharmony (staff no longer happy) & another reason for buying the business has evaporated.
Ultimately, it is and will be very difficult to sell recruitment businesses moving forward because of previous bad experience / the existence of far less risky investments with similar rewards but obviously, it can happen and maybe the Twenty route is the one to take. So, my questions would be:
1st to Adrian - what is the advantage to being so open about wanting to sell from the start? Have you had advice from potential buyers that this is a good thing and if so, why?
2nd to potential buyers - would you want to buy a business that has been planning its exit from the start as opposed to one where the owners / shareholders made that decision at a given point in the businesses lifecycle?
Interesting viewpoint on how to look at running your business. I guess it is true in some cases that those who have founded the business may not necessarily be the best people to cultivate it and grow it into something bigger and better.
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