How can businesses survive in today's economic climate?

In the article “Has Western capitalism failed?” the BBC World Service’s Business Daily programme asked a number of leading figures if they thought whether the Western-style capitalism failed. The answers (and some of the comments) are worth a read. It would appear that those interviewed by the BBC are unanimous in their comments that the system itself hasn’t failed, but rather its interpretation by those who use it.

Retiring Business Owners Need Not Struggle to Sell Their Ventures

In the article, Shortage of Buyers for Retiring Vendors, in The Telegraph of 13th December 2010, Richard Tyler talks about difficulties that business owners encounter when they are looking to sell their businesses and retire.

He says that vendors struggle to find buyers for their ventures due to the uncertain economic environment and face closing their businesses instead or continue running their firms into their late 60s. Staff may also find it difficult to raise the necessary finance to buy owners out because of bank lending policies.

Although potential investors might not pay the multiples that we saw only 3 or so years ago, there are a few things that baby boomers can do to ensure their comfortable retirement:

• Business owners ought to start looking at Exit Strategies early in the process. This will allow them to set their goals and targets and monitor their business's performance
• Set realistic expectations in terms of the price they want for their businesses. When selling a business, most owners will engage the services of their accountants and business brokers. We often see overinflated prices whilst bidding wars commence; however, it is the seller that is left disappointed in the process as their business "sits on the shelf" for months or sometimes years
• Get an independent valuation carried out early as it will give retiring business owners a better understanding of the areas they may need to improve
• Vendors may want to consider selling their businesses to staff and should involve their existing management teams in advance to avoid a bitter disappointment when their staff cannot come up with the cash
• Engage professional services: business disposal experts, such as M&A lawyers, corporate finance specialists and business advisers will add value and help owners to get closer to their target price
• Review and streamline processes and systems in the business to make it more attractive to potential buyers. After all, investors would be more willing to pay the price closer to what the owners have in mind when the business is running "itself"
• There is also another option available to retiring business owners: Deferred Consideration. It is often more beneficial and profitable when part of the money is deferred for 3-5 years. The sellers will get part cash up-front and the remainder at the end of the term. This will remove the pressure on the buyer to raise the whole amount up-front, raise more confidence in the business they are looking to buy and make the transaction much easier

Starting Your Business

A lot of people will say that starting your own business especially in today’s economic climate is madness. But why? Don’t people need the same services? Do they not need the same products?

Perhaps we have all become more careful with our money and cut down on spending on luxury items and think twice before making a purchase. However we still need to maintain our homes, support our families, have friends and therefore have a social life, etc. Of course, in order to do that we have to work to earn money.

Now that the economy is down and a lot of businesses are downsizing with others disappearing people are worried for their jobs which sometimes creates panic and worry as to what they would do if they were not to work.

But isn’t it now the right time to look at what opportunities are out there? Competition, although still fierce, is nonetheless reducing. One thing that a recession does is filter out those businesses that do not have a plan and strategy in place to cope with difficult and critical situations, businesses that are not flexible enough to adapt and change direction if necessary. This is true of some large businesses, which is where Small and Medium Enterprises (SMEs) have an advantage!

A lot of people I’ve met told me that the reasons they had gone into business were:

• Redundancy
• Decided that what they were doing for someone they could do for themselves
• Wanted to be their own boss
• Wanted a change in life-style and couldn’t achieve while being employed

Whatever the reasons for starting a business are, the key to starting a good business is preparation and planning. If you do not have that roadmap, then how do you know which way to go? How do you know that you future business will be a success? How would you develop and grow your business?
FAILING TO PLAN IS PLANNING TO FAIL!
If you are thinking of starting your own business then a lot of work must be done and a lot of points must be considered:

• Legal entity: Sole Trader, Partnership or Limited Company?
• Start-up capital and where it come from
• Sales & Marketing strategy
• What equipment is required
• Premises
• Location
• Pricing levels
• Suppliers, etc.

Get help and advice from specialists, such as Business Advisors, Accountants, Business Link, banks.