It may seems counter intuitive to think that disposing of your business depends on how you structured your business strategy until this day. However, there is a drastic difference between establishments depending on their purposes. I typically split them into 3 categories. Lifestyle, performance, and exit businesses. They are defined as followed:

1. LIFESTYLE BUSINESSES

This is your typical business that was launched to sustain a particular lifestyle. The founder is a key element of the daily operations, he/she is the face of the company, and the size of the company rarely goes beyond 10-12 employees. The initial reason to launch this business is typically to have a job that pay enough to sustains themselves.

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2. PERFORMANCE BUSINESSES

These type of businesses are usually launched by serial entrepreneurs. They are not looking to get caught-up in the daily operations, they have a comprehensive team in place with some elaborate systems in place. Their goals is to build an empire as fast as possible. These businesses are more common in certain sectors such as technology and SaaS.

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3. EXIT BUSINESSES

Similarly to the Performance businesses, these companies are usually founded by experienced entrepreneurs. The establishment is also set for growth and scale, but the goal is for the owner to exit within 5 years. These businesses can be more challenging to build strong values and brand reputation depending on the owners involvement.

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WHY DOES IS MATTER?

It all comes does to how the business is structured, its size, and sector. There is a significant amount of elements to consider when a company is being acquired (Learn more). Most lifestyle businesses will not go beyond a £1 Million turnover with some exceptions making it up to £10 Million. Performance and Exit businesses strive to be much larger then £10 Million turnover.

The difference goes further than the financial. Larger companies will also have an established management team and have over 20 employees to stabilise the operations.

Because of those two major factors, small lifestyle businesses will have some difficulties to sell their business. It has been reported that only 10% will successfully exit, whereas up to 70% of medium and larger companies will be able to sell.

However, there are strategies for smaller businesses to make their business more appealing to buyers. You will need to show as much stability financially and in the operations as you can. In which categories do you think your business fit in? Did it change over time?

I’m regularly meeting with local business owner to talk about their retirement and exit. If you are also interested to discuss this matter, send me an email and we will arrange a video call.