Selling a business
Why most UK businesses never sell, and how owners can change the odds
Guy Bartlett explains why a successful sale starts with the seller's motivation, a clear plan for life afterwards and a business that runs without its owner.
WealthTalk Episode 46: Selling Your Business
Video from WealthBuilders -SSAS Pension & Financial Education.
Generated from the canonical interview transcript and validated against source data by Guests on Air.
Why do so few owner-managed businesses in the UK ever sell?
Guy Bartlett says most owner-managed businesses are run to minimise corporation tax and depend heavily on their owners, so they look weak to a buyer. Sellers often arrive late, tired and anchored to a broker's inflated number. A business sells best when the owner has a genuine reason to sell, a clear plan for life afterwards and a team that runs it day to day.
Most owners of small businesses in the UK assume a buyer will be waiting when the time comes to leave. On the WealthTalk podcast from WealthBuilders, Guy Bartlett, who has built three businesses from scratch and worked on both sides of company sales, explained why that assumption fails far more often than it succeeds, and what owners can do about it years in advance.
The numbers are sobering. By the figures Bartlett shared, around 96 percent of UK businesses are micro companies with fewer than ten staff, and the vast majority of business brokers sell less than 10 percent of the companies on their books. Selling a company is possible, but it is statistically hard, and the owners who succeed usually prepare long before they list.
Bartlett's view is that the problems are rarely about the accounts alone. They sit in the owner's motivation, in the gap between a broker's promise and real profit, and in how much the business still depends on the person who built it. Each one can be fixed, but only if the owner starts thinking like a seller well before the sale.
Key takeaways
- Buyers first ask why the business is for sale, and they want a genuine, well-thought-through reason from the seller.
- Bartlett estimates that 80 to 90 percent of a seller's decision making is emotional rather than financial.
- A broker's inflated valuation can anchor an owner to a price that the business's profit cannot support.
- Businesses that run without their owner and earn recurring revenue are the most attractive to buyers.
1. Buyers start with the seller's motivation
When Bartlett looks at a business to buy, his first question is why it is for sale. He wants to see that the seller's motivation is genuine and that the timing is right, which is not always about money. Selling a company tests an owner physically, mentally and emotionally, so a buyer needs confidence that the seller will see the process through to completion.
His second question is why the owner is not selling to the management team. The answer tells him two things. First, whether there is a second tier of managers who already run the business day to day, because he does not want to buy himself a job. Second, whether those managers will feel disappointed that someone else has bought the company.
For sellers, the lesson is preparation. Bartlett advises owners to think these questions through and to be able to explain the answers in a clear, logical and convincing way. A seller who can describe why now, and why not the management team, starts the conversation from a position of strength rather than leaving the buyer to guess.
2. Decide what life after the sale looks like
Bartlett estimates that 80 to 90 percent of the selling decision is emotional for an owner. Letting go of a business built over ten, fifteen or twenty years can feel almost like a divorce, even when a seven-figure sum is arriving in the bank. That is why the emotional side often matters more to the outcome than the headline price does.
One technique he uses is to ask sellers to describe their perfect day after the sale. Many cannot answer clearly. Those who can have usually also worked out what that life costs, and once that number is known, it becomes much easier to build a deal structure that works for both sides instead of a win-lose battle over price.
Bartlett also urges owners to look at where they are in their life journey. Ideally the mortgage is paid off or nearly so, a pension is in place and investments will carry them through retirement, so the sale is the icing on the cake. An owner who needs the sale to fund retirement is negotiating from a weak place.
3. Build a business that works without you
Too many sales are triggered by illness, bereavement or divorce, Bartlett says, at a moment when owners should be celebrating what they built. His advice is to see the business as an asset early and to build the structure and organisation that let it operate without its owner. He admits that very few owners he has met have managed it.
Brokers can make this harder. Bartlett described two owners in their forties who had been given a fanciful seven-figure valuation. He asked how many years of current profit it would take to earn that figure, and the answer made the point. His advice was to decide what they wanted the business to deliver over the next four or five years and build towards that first.
Recurring revenue is the other half of the answer. Bartlett looks for businesses that supply goods and services other businesses use every day, which he likens to toilet roll companies. When forecastable revenue is already in place, a new owner can spend the first nine to twelve months improving operations and strengthening the management team instead of chasing the next sale.
