Are you working yourself to death?

Your immediate reaction will probably be no of course not, but let me put the question a couple of other ways…

Firstly, have you cut your staffing back due to Covid and now don’t have the right support to take the business forward?  In this case there is the obvious danger to your health and probably to your close family relationships.  However, there is also the danger that as the market picks up your competitors are in a better position to capitalise on this improvement, your business gets left behind, your remaining staff get disheartened (and poached,) leaving the business at risk of entering a spiral of decline.

Or secondly, unless you are going to sell your business or close it (or it fails) then you are going to have the business (around your neck) until you die.  Do you have a plan, even vague if you are looking more than 5/10 years out, as to how you get free from your business?  How much do you need from it to be able to retire, to do those things you have always wanted to?  This obviously depends on your age (now and at the time you want to “retire”) and how long and how much per year you are going to need to live on.  To some extent this is what working with a good Financial Adviser can help with., Knowing what you need will:

a) Potentially reduce your stress levels. When working with a client in their late 50’s (and their IFA) recently we went through her financial situation and realised that she did not need any more money than she had then.  This took all the pressure off, firstly on the levels of profitability required per year, and secondly on how much she would get from the business. This allowed us total freedom when looking how to take the business forward (and her “exit” strategy).

b) Allow you to work out the difference between what your business is worth now and what you need to realise from it in the future. This might influence the timescale for any “sale” e.g. you need another 5 years of income from it when you will have less years for any sale to fund your retirement.  But more likely it will highlight that you need to make your business more valuable to a buyer.  Some years back I was working with two business owners in their 40’s who said they would like to sell their business and retire.  I asked them how much they thought they needed from the sale, they said £1m, when I probed this further they soon realised it would need to be more than £1m each and probably nearer £2.5m (pre tax) from any sale.  We then went through the simple exercise of how a buyer usually values the business, average profitability over recent years (potentially with a bit added for the future as it was growing and increasing profitability) times a multiple of this profit.  It was very obvious that whilst profits were going in the right direction, the average was not enough, so then plans were put in place to increase profitability.

Increasing the value of a business is about increasing profitability, but it is also about how the business is presented.  With profitability you can only cut costs once; the real benefit comes from growing Gross Profit and having a good spread of where it comes from (customers as well as products). Looking to grow a business is a matter of focus and skill, securing specialist expertise can made a dramatic difference to business growth and profitability.  At GJC we have a team of advisors who are experts in all business functions who can quickly make an impact.

The extensive experience in financially analysing a business that we have can be complemented by focused input from an expert on the marketing and operational side to grow the company’s customer and product base.

Sales and marketing input can also have an additional benefit.  A buyer for the business will probably come from the same sector as the customer.  Being more visible through marketing of the business (products) often makes the business more visible, and attractive to a potential acquirer too.

Understanding profit margins and pricing strategy can make a huge difference to the contribution that every individual sale makes. ‘Unpackaging’ packages and looking at the component costs to the business can be eye opening, and small tweaks can make a big difference to the attractiveness of the price point to the consumer, and vitally to the bottom line of the business.  On a recent project my colleague Sarah increased margins by 15% by undertaking this exercise. Looking at different sales channels can increase revenues dramatically with minimal investment.  Sales can come in even when you are closed and can be simple to fulfil.

Simply utilising customer data (of course in a GDPR compliant way) can be a simple way to grow sales and is a useful tool for stimulating sales to counteract traditional seasonal lulls in many industries.  Again on another client Sarah in just a couple of months helped deliver 120% growth in a highly engaged database for a hospitality business.

Loyal customers like to hear from a business they admire, and with the right communication consumers buy more, make more frequent purchases and remain more loyal.  Like any relationship it takes time and effort to develop that connection.  In today’s Digital world it can seem complicated to get the right message on the right platform at the right time, so practical help with a communication and marketing strategy is one of the things we deliver regularly.

With your nose to the grind-stone it can sometimes be impossible to see a route to a more relaxed way of life, or any way of realising the value of your business to allow you this freedom.

Introducing alternative perspectives to work with you to navigate the best exit route really can pay dividends.

A few years ago I went into a small (10 people) business and I could see tax efficiency opportunities.  The owner at the first meeting almost discounted these, he and his wife were just into their 60s and they wanted to exit the business within 5 years.  But they wanted to protect their staff and they thought the business and staff would not relocate.  They could not see a way out that would not mean that they would work until they died.  We developed a plan to deliver what they wanted over 5 years.  I secured the couple a significant amount of extra tax back, we extracted money by pension reducing tax costs, we identified ways to increase profitability by 100% or more.  Very happily we achieved the 100% profitability growth, received an offer for the business after 2 years, and with the 12 month earnout we got the owners the balance of what they wanted 3 years from when we had first started working together.

If you would like to talk about what you want to do with your business, either to sell or just to make it more profitable so that down the line it will be worth more when you do sell it please contact me at 07813 973199) or Sarah on (or 07947 727421).

Any first discussion is always free and without obligation to proceed.

Written by Bill Douthwaite