Selling my Business - advice please
Discussion
Brief history, I bought the company I worked for (14 years) on the 1st February 2020 for £1.5M this sum was "lent" to me interest free by the ex owners of the company and was repayable at the rate of £75K per quarter. The ex owners kept the buildings and I rent them from their pension fund company at £40K PA, I have a 10 year lease with a rent review next February.
I am the sole Director, we have no loans other than some £22K left to pay for the BBL which I took as a very cheap overdraft facility - this has never been used.
Despite Covid happening a mere 6 weeks later, due to the nature of the goods we sell as well as distribute, the business actually increased its turnover and profitability, and still continues to do so, with a net profit of just over £100K for January and February this year alone.
Fast forward to today and I have just £300K left to pay, but in fact I am accruing an additional £75K to pay the debit off on 31st October 2024.
The business has a turnover of circa £2.4M with a net profit of around the £500K area, the £300K PA debit to the ex owners comes from this net profit.
Just last week I was approached by one of the ex owners who informed me that they were considering selling the building and asked me if I would be interested in buying it, as of yet for an undisclosed amount which of course I would value in due course, my gut feeling is somewhere around the £500K to £600K.
If I look purely at the money, from November this year I will have an additional £300K per annum, and if I bought the premises an additional £40K per annum.
I would need to buy the buildings with a loan of some description (I have already talked to my bank) however in theory I would have £340K per annum "spare" to service debit if required.
My dilemma is, at 63 I would like to sell the business, my partner has recently been having treatment for cancer and I would like to go to Spain for the rest of our time together, which could be of course many years or not. I already have an apartment in Spain.
So my question to those that are far more knowledgeable than me is, do I buy the buildings or not - what are the implications of selling a business that has a loan outstanding for those buildings, will it make the business more or less attractive to a potential purchaser. What if it takes years to sell, I could have bought the buildings and paid the loan off, thus potential making the business worth more.
Up until last week my plans were to sell the business as soon as the £1.5M is repaid, so technically 1st November 2024 onwards.
I am the sole Director, we have no loans other than some £22K left to pay for the BBL which I took as a very cheap overdraft facility - this has never been used.
Despite Covid happening a mere 6 weeks later, due to the nature of the goods we sell as well as distribute, the business actually increased its turnover and profitability, and still continues to do so, with a net profit of just over £100K for January and February this year alone.
Fast forward to today and I have just £300K left to pay, but in fact I am accruing an additional £75K to pay the debit off on 31st October 2024.
The business has a turnover of circa £2.4M with a net profit of around the £500K area, the £300K PA debit to the ex owners comes from this net profit.
Just last week I was approached by one of the ex owners who informed me that they were considering selling the building and asked me if I would be interested in buying it, as of yet for an undisclosed amount which of course I would value in due course, my gut feeling is somewhere around the £500K to £600K.
If I look purely at the money, from November this year I will have an additional £300K per annum, and if I bought the premises an additional £40K per annum.
I would need to buy the buildings with a loan of some description (I have already talked to my bank) however in theory I would have £340K per annum "spare" to service debit if required.
My dilemma is, at 63 I would like to sell the business, my partner has recently been having treatment for cancer and I would like to go to Spain for the rest of our time together, which could be of course many years or not. I already have an apartment in Spain.
So my question to those that are far more knowledgeable than me is, do I buy the buildings or not - what are the implications of selling a business that has a loan outstanding for those buildings, will it make the business more or less attractive to a potential purchaser. What if it takes years to sell, I could have bought the buildings and paid the loan off, thus potential making the business worth more.
Up until last week my plans were to sell the business as soon as the £1.5M is repaid, so technically 1st November 2024 onwards.
Buildings aren't necessarily specific to the business, however we manipulate glass amongst other things, and we do have a large BOC oxygen tank on site.
Its an old Victorian station house with factory space added on in the late 60's.
With regards to growing during Covid, that was very easy we make scientific equipment and distribute disinfectants, couldn't stop the phone from ringing in the early days of C19.
Its an old Victorian station house with factory space added on in the late 60's.
With regards to growing during Covid, that was very easy we make scientific equipment and distribute disinfectants, couldn't stop the phone from ringing in the early days of C19.
I would buy the buildings through the business so it would appear as an asset on the accounts, however I don't know really which is the best option to buy or not to buy, if I had the option to buy the premises when I took the company over I would have, however now I'm not so sure as my real aim is to sell up.
I have a 10 year lease, without a get out clause, so if someone else buys the buildings I would be their tenant until 31st Jan 2030, I have no problem with this arrangement, the real issue is do I buy or not.
In theory if the loan to buy was say £500K I could repay that in 2 years, but I guess banks would not be too keen on such a short repayment period as they would earn very little from me.
I have a 10 year lease, without a get out clause, so if someone else buys the buildings I would be their tenant until 31st Jan 2030, I have no problem with this arrangement, the real issue is do I buy or not.
In theory if the loan to buy was say £500K I could repay that in 2 years, but I guess banks would not be too keen on such a short repayment period as they would earn very little from me.
Thanks for your replies, I'm of the same mind as well regarding not buying the buildings I just want some other inputs from like minded people.
With regards to the question of will the business still operate without my experience, the answer is yes it will, I disposed of a part of it that was far more labour intensive and most defiantly would have needed my experience last year.
The distribution side of the disinfectants is very simple and would almost run its self and the glass blowing again almost runs its self, as its the same items made month after month and very well established.
I also have a reasonably healthy cash in the bank and debtors are all paid on 30 days, unlike when I took it over and started with zero cash and just the January invoices as my incoming cash.
I think I will start the selling process very shortly and see what transpires, looking at the multiplies I guess a sale price of around the £2M should be achievable.
With regards to the question of will the business still operate without my experience, the answer is yes it will, I disposed of a part of it that was far more labour intensive and most defiantly would have needed my experience last year.
The distribution side of the disinfectants is very simple and would almost run its self and the glass blowing again almost runs its self, as its the same items made month after month and very well established.
I also have a reasonably healthy cash in the bank and debtors are all paid on 30 days, unlike when I took it over and started with zero cash and just the January invoices as my incoming cash.
I think I will start the selling process very shortly and see what transpires, looking at the multiplies I guess a sale price of around the £2M should be achievable.
Thanks for all the advise, at present my thoughts are to not buy the buildings as I wish to exit fairly shortly (assuming I can find a buyer), I fully understand that if I was staying on for the next 5 years plus it would certainly be in my best interests to buy the property, it has a small amount of land with it that one day could get planning permission for a residential property, although planning permission is doubtful.
I think going forward I will start to market the company for sale with an aim of being out by the end of this year, that way the debit for the remaining purchase of the company will be settled in full.
The next thing I have absolutely no knowledge of is how do you sell a business in terms of where might you find a suitable buyer.
I think going forward I will start to market the company for sale with an aim of being out by the end of this year, that way the debit for the remaining purchase of the company will be settled in full.
The next thing I have absolutely no knowledge of is how do you sell a business in terms of where might you find a suitable buyer.
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