Christmas and New Year now seem a distant memory. All we have left to show is a depleted bank balance and trousers that appeared to have shrunk in the wash (could of course be some over-indulgence, but perish the thought).
For the lucky ones, Christmas is a time of plenty where we will all drink, eat, be merry and worry about the consequences later.
Those consequences can unfortunately have long-term knock on effects to your waistline and your bank balance. “Regrets I’ve had a few, but then again too few to mention,” or so goes the song. This, however, may not always be the case if the regret relates to you being just a tad too greedy, in relation to the anticipated sale value of your business.
This is 2013. We’ve had the mother of all recessions and, although things seem a little brighter, we are a long way from the halcyon days of 2005 and not likely to see the multiples being achieved for a long time to come. Of course, there is always the exception and some deals are going for double-digit multiples, but they are just the exception.
If you are serious about selling you need to understand the market has changed and, a bit like the housing market, things aren’t what they used to be.
The thing with selling your company is that you have been working up to this for some time, had a value in mind and genuinely believe in its worth – am I right?
But to value a business is the buyer’s perspective. Of course, if you are in no hurry then by all means: wait. Things may well pick up. But a few words of caution: the economy worldwide is a long way from recovery and in the meantime, you need to be entirely comfortable your own business is both sustainable and capable of growth.
With the continued worldwide shortage of credit and a general aversion to risk of any sort, the change in valuation perspectives will be a long time coming. If you really want to sell or have worries about the future sustainability of your business (or even industry), take a long hard look before you turn the deal away.
At the moment, entrepreneur’s relief provides you with the opportunity to only pay ten per cent tax on your gain, for a life time allowance of £10m. If you are a higher rate tax payer, you could be paying 50 per cent income tax and 12 per cent NI on at least some of your earnings. You therefore have to earn some fairly substantial sums to make up these numbers, even with some “nice” play on dividends.
This is not about encouraging you to sell on the cheap; it’s more about having a taking, a check about the market and your business. No one is forcing you to sell (unless circumstances are such that you have no choice).
There are all sorts of things many of us would like to have, be it a new Ferrari or a super yacht, and just like winning the X-factor, you may be the lucky one, or you can just keep on re-auditioning until your true potential is recognised.
Just don’t get too old or too jaded in the process – 100 per cent of nothing will always be that nothing.
Jo Haigh is head of FDS corporate finance services and the author of “The Financial Times Guide to Finance for Non Financial Managers.”
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