Pearson Education and Villanova University School of Business have put together an infographic titled “Social Entrepreneurship: Growing Business With A Purpose”. The graphic details the various organization models and ventures of Social Entrepreneurs, how social enterprises are transforming innovation in business, and more.
After years of hard work, sacrifices, stress and worry you’ve managed to build a strong and profitable social business. And you now decide that the time is right to sell your business and move onto another chapter in your life.
But how do you actually go about selling a business? A question that an accountancy firm in West London, which works with a number of charities and social businesses, has been probed with on countless occasions over the past two years.
How can you be sure that you are getting the best price? Will the business itself be badly disrupted by the whole process? How much will it cost in fees and what about tax implications?
These and many other questions come tumbling forward as soon as any serious thought is given to the prospect of selling up. However, it is possible for all those questions to be answered positively if the sale is carefully planned and good housekeeping is performed beforehand.
Realistically you should be looking at a timescale of 3-5 years to get your business in a state ready for a sale. During this time you should consider the following:
Distance yourself from the business
The buyer wants the business, but probably does not want you. You may be required to assist in the handover or there may be a need for you to stay on for a while after the purchase to ensure stabilisation, but the buyer needs to ensure that the business will function without you.
It is likely that the purchaser is going to be a bigger business than yours. They will not want to hear that you keep all the necessary figures in your head. They will expect to see:
- Management accounts:
- Cash flow forecasts
- Sales order pipeline
- Active credit control
To have these records and systems in place and easily accessible will make a big difference to the way your business is perceived. Improve your corporate governance and you are likely to attract a greater interest from potential buyers.
From the buyer’s perspective the value of your business is in its future earnings potential. Probably the most efficient method of estimating future earnings is by reference to historical figures. Consequently, the more accurate your historical figures, the more credibility given to your projections.
Consider arranging for your end of year accounts to be audited if this is not done already.
Any long term, un-reconciled balances need to be cleared.
Carry out a stock take rather than estimating the value of stock held.
Any weaknesses in your financial records will be uncovered during the period of due diligence prior to the sale. The buyer could then use findings of this sort as a reason to negotiate a reduction in the sale price. By removing any such weaknesses now, the records in the 2 or 3 years leading up to the sale will be in a good state.
Your own expenditure
Have a think about costs that the business currently incurs that, while being legitimate, are largely incurred due to your own choice. For instance, do you drive a particularly high cost company car, do you have a very generous entertainment budget, do you really splash out for the staff at Christmas? These costs impact on the actual profitability of the business and it may be worth cutting back on these in order to demonstrate to potential buyers the true profit to be made from your business.
Clean up the balance sheet
Sell any surplus assets and scrap any obsolete stock. Make realistic provisions for doubtful debts – buyers will want to not pay for assets that hold no value.
Do you own the freehold of your property(s) and if so, do you want to retain this? Are you looking to renew a lease? If so, try to keep short, if possible.
Does the business own an investment property such as a holiday home or a buy-to-let? If so, it may be worth considering removing it from the business.
Include your accountant in the process at the earliest opportunity. They will be able to provide advice on your tax position and give consideration to the actions necessary to mitigate any tax liability.
There are (of course) many other considerations, such as renewing contracts, involving other shareholders etc. but the better your planning, the greater the likelihood that you will achieve your goal.
Anyone with any business or market insight is entitled to leverage that to their own advantage; that is capitalism’s basic principle. However, there are, for the best of reasons, rules and regulations concerning the trading of stocks and shares that cut against that free-market ethos. What is more, the barriers to trading in those stocks are often so high that for most of us the option to make the most of our intelligence is simply not an option anyway.
Ordinarily, stock brokers’ commissions, trading fees, the complexities of the tax system and the necessity to trade in sufficient volume to mitigate those costs put the stock market out of reach. But it doesn’t have to be like that.
Access to markets
If you are attuned to the market conditions in a particular sector or even a specific business, it is now possible to take advantage of that information in a way that is free of fees, free of tax and immediately accessible. Financial Spread Betting (FSB) is a derivative-based betting medium that allows private individuals to stake a position on the movement of individual stocks, shares and currencies.
Capitalising on volatility
The description ‘derivative based’ means the stocks, shares, currencies or commodities involved are not actually traded. Instead, based on the financial system of contracts for difference (CFDs), an investor takes a position on a stock, declaring their belief that it will either rise or fall. FSB treats both in identical fashion. If their assessment proves correct, they win to the tune of their declared stake multiplied by however many market points the stock has moved. It is a mechanism that offers the possibility of fast and substantial profits. Thus, an initial £10 commitment will translate into £100 if the market rises by ten points during the period of the bet – players decide for themselves when to stop or close their positions. This ability to capitalise on market volatility is enacted directly by means of either a downloaded trading suite or directly via Tradefair online, who are just one of many specialist betting firms who offer the service.
A balanced risk
If this sounds too good to be true, a word of caution is required. The same open-ended potential for gain applies if the market moves in the wrong direction. If that £10 commitment was made on the basis that the market might rise but it falls, losses will be calculated on the same basis. In other words, that initial £10 will translate to a £100 deficit.
The risks are evident but that should not bar anyone from entering the market if they have a measure of knowledge, insight and confidence in their reading of the market. It is possible to use FSB as a form of play. The majority of trades are enacted over a matter of minutes as traders dip in and out of volatile markets. It was not originally designed as a long-term investment vehicle. The provision of a smartphone app in addition to a desktop trading suite indicates the potential for precisely this more casual adoption.
But, at the same time, there are serious-minded private traders who invest millions via FSB as a full-time practice. Anyone prepared to chart the movement of a particular stock over time and to make themselves familiar with the immediate conditions affecting its market value is putting themselves in the ideal position to be able to trade confidently and profitably. What is more, because no actual purchases are made, FSB trades can be enacted 24/7 irrespective of the schedules of the world’s individual stock markets. This is particularly of relevance if your insight extends to Foreign Exchange or commodity markets.
FSB is not for the faint hearted. The risks are real but they apply most pertinently to those who lack the market intelligence, the discipline and the research base that are the mark of a serious player. For the serious-minded player, the potential for profit makes FSB a mechanism worth investigating. Risk is always the corollary to profit – that’s how capitalism works.
When I was looking to self-publish my book Coffee Shop Entrepreneurs I looked at the entire market from the likes of Amazon Create Space, Lulu, Kobo and Vook who offer print on demand. I knew I wanted to own both the marketing and sales channel which you just don’t get access to if you go with Create Space, however I was forced into that option due to a complete lack of independent UK suppliers who were anywhere near as cost effective, even though you have to pay shipping from America for your own books which can take up to a month.
GDPCIC who we reported hosted an overseas social enterprise visit is now offering perfect bound book printing and brochure printing for self-publishers and I’m in the process of untangling from the Amazon ecosystem to actually own my books as well as the relationship with my customers.
The Tour de France’s much trumpeted Grand Départ from Leeds gave Yorkshire’s largest city a rare moment in the international sporting limelight. Well that was the plan. The weather may have played its part, but there’s no getting away from the efforts that those involved went to in a bid to promote their city and its surrounding region.
Publicity and the Tour go back a long way – all the way to 1903 in fact. That was when the great race was created as a way to boost the sales of the French sports newspaper L’Auto. But these days with a TV audience claimed to be in the billions, such exposure doesn’t come cheap.
Leeds City Council put up £3.6 million to stage the event, and it also underwrote a further £11 million in amalgamated grants from Government and other public sources. That’s a lot of tax-payers’ money!
And that level of investment begs the question, apart from a big bike race and a wild and occasionally wet weekend of partying, what has Leeds actually got for its money?
The answer is not entirely straightforward. The strategic thinking was that those funds would prime a more lasting wave of private-sector investment extending beyond a short-term rash of hotel bookings, extended bar tabs and hangover cures. But, for now at least, that bigger picture remains blurred. The record of legacy investments in the wake of events like this – the Olympics is an even more lavish example – is mixed to say the least.
Olympic Researcher Michael Duignan of Anglia Ruskin University, Cambridge admits the spin-offs from such mega events are not always what everyone imagines. Duignan insists, “The odds are often stacked against embattled local businesses, and seldom deliver economic return on investment”. Leeds is still waiting to see what the breakdown of their ROI might be.
What we can be sure of is that, even before the Tour hit town, Leeds had plenty to be positive about. And staging the event has put those plus points squarely in the international shop window.
The city certainly looks the part: there’s the shiny new First Direct Arena, an inspiring city centre Shopping development, and, more to the point, there are plenty of state-of-the-art new office complexes and business parks springing up all around what was once Northern England’s grim industrial heartland.
But Leeds it seems is grim no more. The award winning Leeds Valley Business Park, boasting technologically advanced, ecologically sound and employee-friendly facilities like the Goodman Offices in Leeds is just one example of the way the place has cleaned, greened and preened up its act.
Leeds does look ready for business. The city is a hub of hi tech and commercial activity and it is amongst the fastest growing cities in the UK. It is also ideally placed to make the most of current drives to move economic activity away from London. Clearly, Leeds is a place that is not afraid to put its money down in order to create a buzz about what it has to offer.
When you combine that sort of commitment with Leeds’ energetically pro-business civic leadership, the Grand Départ looks perfectly timed to signal the start of something far more substantial than simply the start of a bike race.
The takeaway message is loud, clear and lasting – Leeds means business.