Bury based law firm Clough & Willis has undertaken a comprehensive research project looking at how many SME owners in the North West are planning to sell their businesses within the next five years, if they know what steps they should be taking to prepare and how long the process takes.
Clough & Willis approached 450 firms across the region operating in various sectors including Construction, Financial Services, Engineering, Property, Retail, Agriculture, Transport and Manufacturing.
It showed that 65% of respondents are planning to sell their business in the next five years and believe they know what its true market value is. However, only 45% had sought professional advice in determining that figure. Out of those planning to sell 48% were confident that they will be able to sell at the price they want.
In terms of the type of sale, 87% are expected to conduct a trade sale whilst only 13% thought an MBO was likely.
When it came to understanding the process of selling a business, 30% of those questioned did not know the steps they should be taking to prepare for a sale. In the last 12 months just 55% of all those planning to sell had reviewed their Terms of Business, 25% had analysed existing long-term contracts, 40% had looked into their data security processes whilst 50% had amended their employee contracts and staff handbooks. Yet 70% had reviewed their insurance cover.
The length of time it typically takes to prepare an SME for a trade sale or MBO drew a wide range of estimates with 20% claiming it to be under six months whilst 30% stated that it takes up to five years. The time required varies depending on the business but as a general rule of thumb, companies should allow at least two years.
The final question asked whether the recent Brexit vote had made them reconsider their plans to sell. Out of the two-thirds of respondents planning to sell, 90% said that Brexit would make little or no difference, although a third said it may cause them to postpone a sale. The main reason given was that it is still too early to forecast what effect the vote will have.
Guy Lachlan - corporate lawyer at Clough & Willis – said: “The findings of this survey are fascinating as they show there is still confidence and optimism in the marketplace amongst business owners despite the uncertainties as to how Brexit will unfold. In a survey from March this year the ICAEW reported that 60% of small business owners would vote to remain in the EU. Yet already that figure is translating into an overwhelming 90% of those who are intending to sell who now believe that Brexit will not affect their exit other than perhaps some extension of the timeframe.
Guy added: The key for any business owner who is looking to sell is thorough reviews of all areas of their business before inviting approaches from potential buyers.”