Business exits more like a marathon than a 100m sprint, report reveals

THE reality gap between predicting how long a business will take to sell and the reality is 12 months, according to research.

A report by bank Coutts & Co shows that although 46% of entrepreneurs believe that exiting their business will take less than a year the reality is more like two years.

The study also found that on the day of the actual sale only 36% of entrepreneurs feel elated or happy although 32% admitted to being relieved.

Around a quarter said they were filled with tiredness, sadness or anti-climax on signing the deal.

On a financial level, 59% overlooked their financial planning until the last minute despite more than two thirds of respondents agreeing that this is an important part of the process.

According to the survey 89% of entrepreneurs support the creation of a specific exit plan with 28% ranking price as a top priority followed by readiness of the business (17%), cash exit (11%) market conditions (7%), long-term security of the business (4%) and a fast exit (2%).

Interestingly, post sale price remained as a top priority (36%) but the long-term security of the business jumped to second place (15%). A fast exit also become considerably more important (12%).

Paul Chester, managing partner for Coutts in Leeds, said that even though there are currently few opportunities to sell now, things could change fast and it was important to get into shape.

“Creating businesses of scale is often a marathon rather than a 100m sprint,” he added.

“Weathering the recession taps the creativity and resilience that is at the heart of any entrepreneur and in fact often in recessions great businesses are founded as the uncertain and volatile markets spur entrepreneurs to seize opportunities.”

He continued: ” Around 40% of entrepreneurs gravitate back towards starting or running a business post exit and it is this energy to create businesses that pushes entrepreneurs to thrive and drive a country’s well-being. The wealth created through the successful exit is an important element in fuelling this cycle.”

Indeed, 71% of business owners consider themselves as ‘exit obsessives’ who think about selling their business on at least a monthly basis.

While one in four decide to retire early following exit, 40% still needed the thrill of running a business and went on to start again.

More than half of respondents said they still had some direct involvement in the business they had sold.

However, the report also highlighted that entrepreneurial activity in the region is still low compared to the national average.

Mr Chester said: “At Coutts in Leeds we can count more than 70% of our client base locally as entrepreneurs, which is perhaps unsurprising when you consider that in Yorkshire last year there were in excess of 193,765 registered businesses with 17,845 of these residing in Leeds alone and that 4.2% of the adult population were partaking in some form of entrepreneurial activity.

“However the bad news is that at 4.2%, next to a UK average of 5.4%, entrepreneurial activity in the region was at the lowest level in the UK last year. “