Unlocking Success – The Potential for Owner-Managed Businesses
Launching our new series of articles: Unlocking Success - The Potential for Owner-Managed Businesses. Nik Pratap explores growing businesses building up to positive change, with contributions and insights from our Adviser network.
Unlocking Success – The Potential for Owner-Managed Businesses
Launching our new series of articles: Unlocking Success - The Potential for Owner-Managed Businesses. Nik Pratap explores growing businesses building up to positive change, with contributions and insights from our Adviser network.
OMB shareholders usually have a long job description. They are the people who are ultimately responsible for everything across the business and who are regularly in “firefighting” mode. It is no surprise to see so many spending the vast majority of their time on immediate priorities, consequently losing time to focus on the more exciting long-term opportunities for the business.
Most business news headlines are about macroeconomic topics – politics, inflation rates, FTSE performance, GDP, failures of the largest corporates and executive bonuses. We follow this news like many others do, but we increasingly see a gap between the general sentiment of these headlines and the businesses we speak to.
One trend that has emerged over the past year is that the vast population of outstanding owner-managed and family-owned SMEs that have been flourishing – top and bottom-line performance with double digit year-on-year growth and balance sheets that have strengthened (with many having made exceptional use of CBILS loans).
One of the common characteristics of these businesses is that their outlook has shortened considerably. A combination of COVID, Brexit, the Ukraine war, supply chain issues, political upheaval and uncertainty over tax policies has forced shareholders to be more short-term in their plans. With the key leaders in the business focussing on commercial, operational and people plans, some rocket fuel has been added to immediate performance. Consequentially, there has been less time to focus on long-term planning and high-level strategies to create value for the business and the shareholders.
We spend a lot of our networking time with the advisors, investors and bankers across the region and every single one can see the opportunities in the SME and OMB sector – it is a huge market for business activity and we expect to see an increased volume of transactions to unlock the potential of these businesses over the next year.
We recently attended an event hosted by Shorts Chartered Accountants, Taylor & Emmett & HSBC along with 50 business owners, to look at the options open to them and how it feels to sell a business. The full video of the event can be found here.
Andy Ryder is the Corporate Finance Partner at Shorts:
"We often find that a significant proportion of an owner manager’s personal wealth is tied up in one asset – the business they have built , often through blood, sweat and tears, over many years. Realising the value of that asset on exit or retirement is therefore hugely important , and usually a key role for Shorts as advisors is maximising price.
However, the chosen exit route is rarely a decision based purely on valuation. We always advise owners to think clearly about all their objectives. Perhaps certainty and timeframe to exit or the structure of when the payments will be received and what strings are attached takes precedence over the top line number? Often even more importantly, this is usually an emotional and not just financial decision – it is a business that the owner manager cares about deeply. 'What will this transaction mean for my employees?' and 'what will the legacy of the business be?' are often just as important questions to consider to those related to the financial aspects."
We have planned a series of articles tailored for the shareholders of SMEs to set out the options that are available to them and that may suit their objectives. We will be looking at as many of the ways for shareholders to create value and to enjoy the rewards of their investments for themselves as possible:
We will be sharing advice from some of most highly regarded advisors in the market along with comments from shareholders who have already actioned plans, and the CFOs, CEOs and other directors who have joined these businesses.
Our next article will be published on next week and we will be talking to one of the leading legal dealmakers in Yorkshire and a CFO with experience of two successful exits in the past three years.
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