Since 2010, we have discussed business growth with a lot of Fire & Security company owners from across the country. More and more, we are hearing them say that they would rather acquire customers by buying another company than invest in lead generation.
So, if there are companies looking to buy, then there must also be some Fire & Security owners who are ready to sell.
Are you thinking of retiring into the sunset or raising funds for a new venture in a different niche?
But how can you ensure that your Fire & Security company is the best option for someone who is hungry to buy? And how can you be certain that you will get the best price?
We asked Mergers & Acquisitions expert, Andrew Hill.
Buyers have plenty of choice, so you need to stand out from the crowd.
Taking some proactive steps before marketing the business will secure a higher sale price. And allow you to see the business from a different perspective.
So, here are my ‘Top 5’ tips to ensure your fire & security business doesn’t squander this opportunity.
1. Make yourself redundant
A buyer is investing in the business not you, the owner. In all likelihood, you will leave the business at some point after the sale.
So it is a massive risk if you are central to every aspect of business success. And therefore reduces value.
You need to demonstrate that your business will thrive and continue to grow even after you have departed.
Letting go can be very hard but it is a vital part of creating value. Take three months at a minimum to:
- Define your role in the business. Consider this honestly, capturing all the areas you’re involved in. Are you out doing the job of a service engineer every day? Or performing site surveys and writing quotes?
- Review the organisational chart to ensure roles and responsibilities are well documented. Rather than job titles, define areas of accountability.
- Start documenting processes and your decision-making criteria. This can be done by creating manuals, checklists or flowcharts.
- Start the training and delegation process as early as possible. Be upfront with your people – explain you want to take the business to the next stage of its development and part of that is giving people more responsibility.
It’s not necessary to remove every trace of yourself from the business but you do need to position yourself as the leader, the strategist and the mentor to your people.
Another obvious risk post sale is the issue of family members in key roles. Buyers will be concerned that family members won’t act with the same objectivity and confidentiality as unrelated staff members. At a minimum ensure they have defined roles and employment contracts in place.
Now test your redundancy by removing yourself from the business for a long holiday. If you’re putting your business up for sale, you are going to need it!
2. Know your numbers
Buyers say that in 95% of cases the financial information presented by sellers was poor. Before you market your business, sit down with your advisor or accountant.
Ask yourself, what is the story the numbers are telling? Is that consistent with my vision for the business, and the story I intend to communicate to buyers?
It is fine to give limited financial headlines before contracts are signed, but certainly once the due diligence begins, buyers will appreciate numbers that are detailed, accurate and consistent:
- Statutory accounts going back 3-5 years
- Monthly management accounts (trading Profit & Loss as a minimum)
- The most recent balance sheet that can be completed accurately.
- Aged debtors and creditors reports
- Cashflow statement
- Trading forecasts for the next 12 months monthly and 3 years annually. Be realistic without being unnecessarily conservative.
- Cashflow forecasts, particularly if capex is significant
3. Tighten Up Those Bad Habits
Which of these are you guilty of?
- Not having staff on current employment contracts
- Engaging contractors without checking whether they should be classed as employees.
- Not collecting debts in a streamlined manner. Which can also lead to paying suppliers late or in the wrong order.
- Not submitting your expenses on a regular basis. You may think you are doing the business a favour, but it just means the books don’t reflect reality and when you do catch up, you must explain a spike in the books.
- Taking drawings from the company without clearly deciding and documenting what it is (salary, dividends or a loan).
- Sloppy website – out of date content, broken links and other easy-to-fix issues.
4. Communicate a clear story and vision
What is the history of your fire or security business, how did it come to be the success that it is today?
When you go through the sale process you will be telling this story many times to many different people, so get it clear in your mind now.
But, remember, it needs to be consistent and reflect what the numbers say and have a compelling growth story that creates a return in the future.
With a small fire and security business this doesn’t have to be hugely sophisticated but you need to demonstrate something that is well thought through, and that the company has the resources in place to execute it.
5. Get some expert support
When selling your business, professional advice is a must. Your accountant will need to be familiar with M&A transactions, ideally have recent deal experience, and be prepared to be fair with their fees as these can spiral. They should also be brought into the equation early on to assist with financial preparation.
Ensure your lawyer is very experienced in corporate transactions to avoid multiple difficulties which can be terminal to the deal.
About Andrew Hill and Fire & Security sales
New Path Advisory’s Andrew Hill is a registered accountant and investor. He specialises in supporting Fire & Security business owners in the £500k-£19m sales revenue bracket who are looking to buy or to sell.
If you are looking to sell, he will help you prepare carefully, promote your business with impact and reach success swiftly.
If you are looking to grow through acquisition, he can identify and confidentially approach and secure targets, leaving you to focus on your business.
You can contact Andrew here