Mentor Insight: Exiting your Business

Paul Cartwright talks about the benefits of business mentoring and strategies for exiting your business.

Paul is Chairman of Dorset Business Mentors and has several directorships and chairmanships in profit and not-for profit organisations, as well as an active role in a fast-growing North American process safety business. Paul has been mentoring business in Dorset and Hampshire for over a decade. In that time he’s worked with Tech and FinTech businesses, a robotics company, app developers, an acting school and a couple of design/ creative agencies. Some businesses were early stage, others were stable, some were growing and the odd one was growing beyond their owner’s wildest dreams. But in his business mentoring relationships, one question returns time and time again….. “how will I ever be able to exit my business and enjoy the rewards of all my hard work?”

Paul has been in business himself for over 30 years. Trained as a physicist and expecting a career as a researcher, Paul fell for the allure of business and left a university position with a colleague to start an engineering consulting and testing business. The business grew internationally - organically, through new start-ups and through acquisitions; and as CEO, Paul eventually sold the business to a German trans-national corporation. “When it comes to buying/ merging and selling businesses, I think I can claim to have been there and got the Tee shirt”, says Paul.

So how could Paul’s experience in a science business operating internationally have any resonance with small businesses in Dorset, sometimes with just 2 or 3 employees, perhaps retail and trading in completely different market sectors?

“Good question” says Paul. “I thought that too when I put a toe in the water of business mentoring. Actually, what I quickly realised is that my experiences of starting a business (we began with 2 people), working out how a business works, growing it and eventually selling it seems to have involved me in pretty much all aspects and stages of company evolution. I wasn’t quite sure about the difference between an accountant and bookkeeper when I started, I had never employed anyone before and I’m not sure I could have explained clearly how marketing was different from sales. I’ve found my own learnings and experience of all stages of business development was, after-all, readily transferable to most types of business”.

But of particular relevance to this article, it’s Paul’s interest in exiting a business that we ask him about here. Having sold his own business and having bought a couple of small businesses himself on the way, he’s been on both sides of the fence when it comes to business transactions. Indeed, since joining Dorset Business Mentors, he has worked with mentees, helping them develop and realise their own exit plans.

Paul says “From my experience, small business owners are generally looking for very similar things when it come to the time to exit their business. Of course, as a business owner, there comes a time you rightly would like to enjoy the rewards of all the hard work you have put into your business, however large or small. But if you have employees, you are likely to be concerned for the future of your staff when you leave. With smaller businesses, the owner’s relationship with their employees can sometimes be more like family or friend. Indeed, it may even be family succession that you have in mind. The future for your successors matters. But as well as this, you may also feel a sentimental attachment to your business and customers. You may want your business to live on after your exit, whoever takes up the reigns.”

Paul notes that there are many options available for business owners to leave their businesses but suggests that the key to a successful outcome is early planning. “This is where a business mentor can come it. She/he can take you away from the immediate pressures of running your business and to a place where imagining the possibilities has space to happen.”

In Paul’s view, having a trusted business mentor can bring real value here. Over 1500 business in Dorset have had the help of a Dorset Business Mentor over the past 10 years. A good mentor will likely have a wealth of business knowledge and will often have built long-standing relationships with their mentees. The business mentor will have gotten to know their mentee and their business pretty well too. Mentors are seen as independent and trusted – and completely detached from the emotions of running the business. So a business mentor can discuss with you all the options available for leaving your business; some you will have thought of – and some you will likely not have considered.

Paul reflects on some of the options available. In one case he recalls a used machine tool supplier who simply stopped buying – and gradually sold his stock. The owner had an employee of 20 years’ service, but he managed to find a job for his employee with one of his customers. The bank balance went up and the pension fund grew.

Selling your business to another party is perhaps a more common route to follow but who will buy? It’s often a competitor who is interested, but selling to a competitor can be challenging, particularly with regard to loss of confidential information if the sale falls through. You can talk through the issues with your business mentor here and plan for a secure conversation, negotiation and hopefully, a sale.

Transferring your company to one or more employees is another option that owners like in theory but sometimes struggle with. ‘I doubt if Sarah or Tom could afford to buy the business’. ‘I’m concerned that Phil and Amy are not really capable of running the business in my absence.’ But it may be surprising how effective Sarah or Tom or Phil and Amy could be – if they are coached (mentored?) and motivated. An employer wishing to sell their business to certain employees can smooth the process by introducing a bank and by being prepared to take deferred proceeds, perhaps through loan notes, avoiding the need for staff to find significant sums of money themselves.

Another option that has become available quite recently is to sell the business to an Employee Ownership Trust (EOT) where the beneficiaries of the Trust are the employees. There are tax advantages to both owners and staff in doing this. The EOT came about because of the government’s admiration of the John Lewis partnership model, where all employees are ‘partners’. The EOT was the governments answer to this.

Of course, if superfast growth is your mantra and you already have significant sales and ideally profits, then you may be looking for investment to help you grow first with the idea of building a company with more value before you sell. At the smaller end, Business Angels can have a role in financing your business, and at the larger end, Private Equity firms can bring opportunity. Business Angels are relatively wealth individuals, or more likely syndicates of individuals, who often bring business skills and money to a business. They tend to operate from a hundred thousand or so, up to about £1m. Private equity goes higher and may even allow you to take out some of the value of the business upfront with a view to making even more money yourself (and for them) in an aggressively funded expansion and second sale.

So how does Paul feel about the current business climate with business in lockdown number 3 and still with uncertainty ahead. Paul is bullish! In his view, whilst there are certainly sectors of business that are having a hard time there are other like the proverbial ‘coiled spring’ that will jump to life as things gets back to normal. He observes that may of the businesses being mentored are planning for the rebound now with their mentors and that if they get it right, the release pent-up demand, when it comes, will allow some businesses to rocket. But this is also a moment in time when many business owners have time to consider their future and their future exit strategy. His advice: Get a Dorset Business Mentor now! Plan for the future whilst you have the time. You will not regret it.

If you would like to know more about the Dorset Business Mentors proposition we encourage you to contact our experienced team for a confidential chat. We appreciate that every client is individual and we are best placed to respond to your requirement in person. Please visit our Contact page for details.