It wasn’t always clear. If we were to do it all again, I would think about the exit a lot more – rather than just the “now”. It’s very easy to focus on the “now”, especially if it’s a successful business like ours.
We received two separate offers [to buy the business]. We thought, “if we don’t take one of these opportunities, how long are we going to carry on doing what we’re doing? What is going to be the end of the story?”
But you can’t just say to everybody “I’ve had enough, everybody go home”. That’s not really a viable solution, is it? I don’t feel that’s very ethical way to close a business. So, if you’re not going to do that, what are you going to do?
We thought, actually, [an EOT sale] seems the best of everything. We got offers from competitors, but when you get into the nuts and bolts of it, what does that leave behind for everyone else?
Particularly with the nature of our business, are [the staff] all just going to be made redundant? Is it just going to be an asset strip, where they take our customers and database, merge it into their own, and say “bye bye” to everyone who helped us get to the position we were in?
It didn’t seem particularly fair to say: “thanks very much employees – you’ve managed to help build up the business to the extent where we’re able to go and play golf, and now you’re left applying for your own job.” I’ve been in that situation a few times before and it’s not pleasant.
Additionally, with the trade sale route, the buyers focussed an element of the valuation on very short-term financial performance. This increased our risk – did we want our business to be valued on six months of post-pandemic sales, without the last 15 years being considered? In an EOT transaction, the Trustees can take a more measured approach to valuation based on a greater understanding of the business and a longer-term view.
It’s reassuring to know that lots of other companies are choosing EOT. One of my friends has a company that has recently gone through the EOT process, a large construction firm.
With an EOT you don’t have to release your customer details. We don’t run the risk of customer data getting into the hands of someone we do not trust. There was nothing to say that those people would do an efficient exercise. The risks were there. So, [an EOT] took that away.
EOT was a good solution because there was a lot of cash in the business. This is a good problem to have, but the question was how do we get it? We’ve either got to exit or extract it, which would mean lots of tax. [An EOT] was a really good solution in terms of tax benefits.
It’s going to take a while before we’re in the same financial position that we would have been in if we’d sold to a competitor, but we’re not in a rush. We don’t need it all right now. If we did go down a trade sale route, and if it did backfire, that would have been a real big problem, which would have meant that our current lifestyle wouldn’t have been maintained.
[EOT] was a much safer route to go down, pending valuation.
The headline bullet points almost made it sound too good to be true: exit tax free, we wouldn’t have to sell to a competitor, and we could still be in a job!
You can see how it doesn’t work for every business, but the more that we spoke about it, it became clearer that we did meet the criteria.
It was always tempting to go down the route of a trade sale because of the day one situation. But because it’s our own business owing the deferred amount, we deemed it less risky because we know it’s there, we know the way the business works, and we know our customers. We’re also the ones that can still make a bit of a difference in terms of how it operates in the meantime.
[Shorts] gave us enough advice initially to think, “alright, let’s go and have a think and have a chat”, and you guided us through the process and helped us move in the right decision for us.
The EOT was clearly the better route, from a personal side and business point of view.
The original reaction from all the staff was that there had to be a catch: “They’re not just giving us the business, surely? How does that work?”
When they understood how it works, there were positive comments, including thanks for not just selling out. A few staff admitted they knew we were going to sell at some point, and it was a fear of theirs that we would sell up and they would not have a job. We understood that.
Some people were sceptical; others were actively wanting to do more. They said “I want to pay you out quicker so I can own it, so I can start making money. I’m going to do more sales this month.”
The challenge has been getting them to think about things differently. What was once our financial problem [as the owners], is now the company’s financial problem. Staff need to think about that, and whether they can step up and bring the solutions instead of relying on us.
The ultimate aim is that we’re not going to be here operationally. People are getting used to it. They are seeing the big picture of things – for example, we’ve contracted out all IT now to let people work from home. We are no longer the first port of call for IT problems. Employees are taking responsibility for taking care of these areas.
Post-transaction, it’s focused our mind on what the business should be doing and has allowed us to step back. It has forced us to delegate more and relinquish some control of day-to-day business.
We’re definitely going to take advantage of that and press on the fact that they have earned extra money because of the EOT. We will say “this will happen every year, and if you think the bonus is good now, consider what it will be like when it is you who owns the business in full.”
It has demonstrated an opportunity for all staff to grow their earnings significantly.
We told them they now have the ability to take the bull by the horns; this is the opportunity to pay that mortgage off early, have that nicer car. And we can tell that some people really want to grasp this opportunity.
We looked at two sides of the business – administrators and account managers. Both sides need to be represented.
We look at the longest serving members of staff in those areas, because they have seen more of what the industry has thrown at the business, such as different legislation or different suppliers. Both sides are represented, and they are represented by the people that are most experienced in the industry.
The fact they had stuck with the business for that length of time and shown their loyalty to the company over a decade was acknowledged.
There were questions about workload. We reassured them that there would be some work and responsibility, but most work is done by officers and directors.
Yes, I would recommend Shorts. Our relationship with Shorts has spanned generations of different business ownership in this company. We are coming up 30 years working with Shorts. We’ve always valued your advice. I don’t think we’ve ever lost out as a result of Shorts’ advice.
It’s the personable approach – you will answer questions honestly and advise us on which ideas are good and which are bad.
Professional. Innovative. Friendly.
