Why it helps to know ‘your number’ before selling your business
June 22, 2023 - 3 minutes read
Posted by Claire Parker
By Ed Stubbs, Financial Planner
I recently spent my lunchtime at a Pro-Manchester event called ‘Increase the Sale Price of Your Business in 6 Weeks’, hosted by Investec and run by Elizabeth Clark, CEO of Dream Agility in Ramsbottom.
The panel were unanimous in advising that whilst a company’s numbers, i.e its revenue/profit/EBITDA etc are taken into account via various formulas such as ‘discounted cash flows’ or by taking a multiple of certain metrics, these figures are usually only useful to the buy side if trying to negotiate down the sale price.
Transactions are, in reality, rarely settled at the number produced via that analysis.
They placed much more importance on finding out what the seller and buyer wanted out of the deal and emphasised the fact that when the seller ‘knows their number’ everything runs much more smoothly for all parties. We would define ’their number’ as the sum, net of tax and professional fees, that would deliver the lifestyle the seller wishes for, whether that be jet-setting across the globe, putting the children through private school and university or simply being comfortable with a relatively modest income that covers all expenses – everyone is different and that number is unique to them.
The main benefit of a seller knowing their number? Confidence.
Confidence that they can agree on the transaction and move forward, safe in the knowledge they’ve done the right thing at the right time and for the right price.
And confidence doesn’t just stop at the seller. Confidence can filter through to all stakeholders in the transaction, whether that be the buyer, who now finds it much easier to negotiate a suitable price that both sides are happy with, or even the corporate finance professional, who doesn’t have a seller getting nervous at the last minute and pulling the plug altogether. We hear countless tales of deals falling apart, so the more confidence we can help to bring to all parties, the better for everybody.
How can Xentum help?
Xentum has been introduced to a number of sellers by various stakeholders to deliver a WealthPlan™, our one-off financial plan that helps people understand their finances in relation to their short and long-term lifestyle needs and aspirations.
WealthPlan™ is delivered over two main meetings. In the first session, we take an empathetic approach to getting to know the seller’s aspirations and dreams for their future, as well as understanding what keeps them up at night, whilst getting to know in-depth their current financial situation. We then complete a detailed cash flow plan using lifetime financial modelling tools, to show them what their business sale number needs to be to give them the confidence to proceed.
Recently, a client who was acquiring another business introduced us to his seller. The WealthPlan™ gave the seller confidence to complete the transaction and we’ve continued to work with them advise on the investment of the net proceeds of the sale.
Another introduction came from a corporate finance team, who again recognised the value in providing confidence to a seller who they felt needed some support to complete the transaction.
The Xentum difference
Our holistic approach – We have a unique model in the financial advice space to help clients to enjoy their wealth and live with greater peace, joy and freedom. One aspect is Xentum Adventures, a partnership with a tour operator that provides unique holidays for our clients. We also run events through Xentum Wellbeing to help clients truly ‘grab life’.
Fixed fees – we also charge fixed fees, rather than the percentage fees which is the norm in the financial services industry. This provides simplicity, fairness and transparency to all clients.
If you’re selling your business, are a corporate finance team supporting on the sell side or a buyer that wants to ensure that a crucial acquisition proceeds as planned, give me a call on 01925 398338 or email email@example.com.