I need a way out... help
Discussion
Hi,
I’ve created an alternative account for this just to be on the safe side.
Essentially I feel I need a way out of my current business(s) but need help to see a way, or in my wildest dreams even, rescue them… After 20 years I feel completely spent - I’ve had enough of the 24/7 SME work lifestyle, doing 10 jobs in 1, and the fight/stress of being slowly financially strangled, particularly over the last 5-10 years with no uplifts in funding - mainly public sector work which is also a nightmare for payment too…
My quandary is I have a fantastic, skilled and long-serving loyal team (approx. 20) that I would like to protect, and for the projects to be able to continue for clients without me if possible. The company is very lean and really well setup in terms infrastructure and ability to deliver work - with high status, significant value national healthcare projects totalling £1 billion+ (very poor paying to us…) for which we get excellent feedback from all of our direct clients. If only we could source new better paying projects to feed the company, it’s like there is just no work out there at the moment…..
The company is currently making some profit but this is ebbing away rapidly year by year (could be a loss this year) with continual effectively zero uplifts in funding, or cuts, increases in costs (NI, wages etc.), and an increasing threat of losing our core work projects - to be handed to foreign companies that are paid 10-20 times what we get paid, with a track record of non-delivery, standard corrupt public sector practice…
In terms of structure, I have two companies which are connected. Pretty much all of the expenses (all staff, IT costs etc.) are in company 1 which does some of the work projects directly. Company 2 has projects and pays company 1 for work it does to deliver them. Over the 20 years, both companies have built up significant capital (our family retirement fund), 2/3 of which is in company 2. It would be an absolute disaster for the companies to start losing money and for the financial security I’ve built-up over so long to vanish.
I still love the great work we do to improve healthcare for patients and support clinicians, but this is now lost in the constant 24/7 daily mire of stress and sleepless nights, and I have the sobering words of my accountant ringing in my ears that I cannot carry on as I am or else I will be in a box very soon….
Apologies for rambling, grateful for any ideas, suggestions, thoughts etc.
I’ve created an alternative account for this just to be on the safe side.
Essentially I feel I need a way out of my current business(s) but need help to see a way, or in my wildest dreams even, rescue them… After 20 years I feel completely spent - I’ve had enough of the 24/7 SME work lifestyle, doing 10 jobs in 1, and the fight/stress of being slowly financially strangled, particularly over the last 5-10 years with no uplifts in funding - mainly public sector work which is also a nightmare for payment too…
My quandary is I have a fantastic, skilled and long-serving loyal team (approx. 20) that I would like to protect, and for the projects to be able to continue for clients without me if possible. The company is very lean and really well setup in terms infrastructure and ability to deliver work - with high status, significant value national healthcare projects totalling £1 billion+ (very poor paying to us…) for which we get excellent feedback from all of our direct clients. If only we could source new better paying projects to feed the company, it’s like there is just no work out there at the moment…..
The company is currently making some profit but this is ebbing away rapidly year by year (could be a loss this year) with continual effectively zero uplifts in funding, or cuts, increases in costs (NI, wages etc.), and an increasing threat of losing our core work projects - to be handed to foreign companies that are paid 10-20 times what we get paid, with a track record of non-delivery, standard corrupt public sector practice…
In terms of structure, I have two companies which are connected. Pretty much all of the expenses (all staff, IT costs etc.) are in company 1 which does some of the work projects directly. Company 2 has projects and pays company 1 for work it does to deliver them. Over the 20 years, both companies have built up significant capital (our family retirement fund), 2/3 of which is in company 2. It would be an absolute disaster for the companies to start losing money and for the financial security I’ve built-up over so long to vanish.
I still love the great work we do to improve healthcare for patients and support clinicians, but this is now lost in the constant 24/7 daily mire of stress and sleepless nights, and I have the sobering words of my accountant ringing in my ears that I cannot carry on as I am or else I will be in a box very soon….
Apologies for rambling, grateful for any ideas, suggestions, thoughts etc.
I work for a business that has 95% of its business from public sector, including a fair chunk from NHS and I can’t relate to what you’ve said about struggling to get paid and funding cuts - although our contacts always reel out the latter in meetings, their spending grows year-on-year with us.
I also can’t understand how a situation car arise where the same work will go to a different company at 20x what you’re being paid unless they can add value in some way you can’t. You don’t need to be a big business to have a good value proposition.
How did the business come about? Are you good at the work you do and built off the back of that? I’m sensing you’re perhaps more technical than entrepreneurial and I’ve seen a few business owners like that lose their way over the years when the market changes and they don’t keep up and fall into the trap of competing on price.
I also can’t understand how a situation car arise where the same work will go to a different company at 20x what you’re being paid unless they can add value in some way you can’t. You don’t need to be a big business to have a good value proposition.
How did the business come about? Are you good at the work you do and built off the back of that? I’m sensing you’re perhaps more technical than entrepreneurial and I’ve seen a few business owners like that lose their way over the years when the market changes and they don’t keep up and fall into the trap of competing on price.
It sounds like you can no longer see the woods for the trees. That’s a sticky wicket. It sounds like the audit trail might lead a potential investor to be cautious, so maybe find someone to hand the reins over to, who has fresh eyes, and can see a path you maybe can’t. It’s a tough call, but sometimes, bailing, is the best option.
OP, I run a B Corp M&A firm and do a chunk in HealthTech- we also do some informal strategy and management consulting off the back of 15 years in M&A and 10 years building and exiting my own businesses.
Would an informed, informal, experienced sounding board help?
I lost my first business in the 2007 crash, losing 100 staff and the shirt off my back..... would be really pleased to help you avoid the same!
Would an informed, informal, experienced sounding board help?
I lost my first business in the 2007 crash, losing 100 staff and the shirt off my back..... would be really pleased to help you avoid the same!
Sounds like you need to sell, support the new buyer for a period and then step away (you might find as no longer being the owner, you actually get to enjoy the work again, and end up working longer term).
Even though there is little profit, a buyer should still buy the cash reserves, allowing you to take it as capital gains (and take advantage of business asset disposal relief relief on the first million £)
Is there a competitor you could sell to? They might be able to make the business profitable through eliminating some of the overhead costs, and therefore be keen to buy.
Even though there is little profit, a buyer should still buy the cash reserves, allowing you to take it as capital gains (and take advantage of business asset disposal relief relief on the first million £)
Is there a competitor you could sell to? They might be able to make the business profitable through eliminating some of the overhead costs, and therefore be keen to buy.
Very simple, but always lots of reasons why you haven’t/don’t think you can.
You need to raise prices.
You have a good product, you can’t make money, your time isn’t fully costed less alone your risk money, competitors will be dearer.
The company, as it currently stands, will fold absent price increases. Therefore the answer is clear, but execution is not straightforward.
I’ve advised many businesses over the last 5 years of the importance of price. Always get push back and concerns by one or two of the board, for understandable reasons, but it’s actually been the easiest way to drive equity value rather than eg volume.
You need to raise prices.
You have a good product, you can’t make money, your time isn’t fully costed less alone your risk money, competitors will be dearer.
The company, as it currently stands, will fold absent price increases. Therefore the answer is clear, but execution is not straightforward.
I’ve advised many businesses over the last 5 years of the importance of price. Always get push back and concerns by one or two of the board, for understandable reasons, but it’s actually been the easiest way to drive equity value rather than eg volume.
JonPH said:
Very simple, but always lots of reasons why you haven’t/don’t think you can.
You need to raise prices.
You have a good product, you can’t make money, your time isn’t fully costed less alone your risk money, competitors will be dearer.
The company, as it currently stands, will fold absent price increases. Therefore the answer is clear, but execution is not straightforward.
I’ve advised many businesses over the last 5 years of the importance of price. Always get push back and concerns by one or two of the board, for understandable reasons, but it’s actually been the easiest way to drive equity value rather than eg volume.
Is it not a wee bit more complicated though? Strategy plays a key part in the equation. Is it also not better to drive the bottom line down, than default to price increases and / or shrinkflation?You need to raise prices.
You have a good product, you can’t make money, your time isn’t fully costed less alone your risk money, competitors will be dearer.
The company, as it currently stands, will fold absent price increases. Therefore the answer is clear, but execution is not straightforward.
I’ve advised many businesses over the last 5 years of the importance of price. Always get push back and concerns by one or two of the board, for understandable reasons, but it’s actually been the easiest way to drive equity value rather than eg volume.
OK, OP... a lot resonates with me.
I too work exclusively for public sector clients – albeit local authorities, government agencies and the like. I recognise much of the issues you mention. The two differences are that I thoroughly enjoy what I do which brings its own problems in that I spent too much time working and do far more than I’m paid to do. And you have a sizeable team that you can rely on, which I don't.
Now to me, it seems as though you’re probably not leaning into that team as much as you could and should. Are there not those on the team with the potential to step up to a management role? Are there not those that could do what you do?
If you were to sell, you’d need to extract yourself more from the running of the business anyway. To extract maximum value from the sale of your business, you need to be unimportant to it.
So if it were me, I’d be prioritising that – becoming less important to the day to day running of the business. Promote or recruit someone to run things. Do that, get it right and you may find your problems diminish anyway.
Making that transition is not without challenge which is mostly psychological. It’s your baby and handing over the reigns is tough. I can connect you to a chap who’s brilliant at helping business owners navigate this so PM me if you want an intro.
However, when doing work for the public sector it’s the client that determines the price. A budget for a project is set and is up to the bidders to determine if it’s viable and worth bidding for. The onus is on the supplier to be efficient and keep their costs low in order to maintain profitability.
There’s a lot of benefits in working for the public sector but also some trade-offs of which this is one. Sadly.
I too work exclusively for public sector clients – albeit local authorities, government agencies and the like. I recognise much of the issues you mention. The two differences are that I thoroughly enjoy what I do which brings its own problems in that I spent too much time working and do far more than I’m paid to do. And you have a sizeable team that you can rely on, which I don't.
Now to me, it seems as though you’re probably not leaning into that team as much as you could and should. Are there not those on the team with the potential to step up to a management role? Are there not those that could do what you do?
If you were to sell, you’d need to extract yourself more from the running of the business anyway. To extract maximum value from the sale of your business, you need to be unimportant to it.
So if it were me, I’d be prioritising that – becoming less important to the day to day running of the business. Promote or recruit someone to run things. Do that, get it right and you may find your problems diminish anyway.
Making that transition is not without challenge which is mostly psychological. It’s your baby and handing over the reigns is tough. I can connect you to a chap who’s brilliant at helping business owners navigate this so PM me if you want an intro.
JonPH said:
You need to raise prices.
I’ve advised many businesses over the last 5 years of the importance of price. .
I completely agree on this. I’ve advised many businesses over the last 5 years of the importance of price. .
However, when doing work for the public sector it’s the client that determines the price. A budget for a project is set and is up to the bidders to determine if it’s viable and worth bidding for. The onus is on the supplier to be efficient and keep their costs low in order to maintain profitability.
There’s a lot of benefits in working for the public sector but also some trade-offs of which this is one. Sadly.
StevieBee said:
However, when doing work for the public sector it’s the client that determines the price. A budget for a project is set and is up to the bidders to determine if it’s viable and worth bidding for. The onus is on the supplier to be efficient and keep their costs low in order to maintain profitability.
It only works like that if you're being passive and blind bidding on tenders with an unrealistic budget. That's the road to ruin.Get in early in front of the right people, shape the project, help them develop a sensible set of requirements and budget. This gives you the opportunity to demonstrate your value and differentiation. Become a partner rather than a supplier.
We're bidding on contracts where the other bidders are massive national/multinational businesses turning over billions and we take them out all the time because we are more agile and responsive and we can get customers to a solution and set of requirements few others can deliver on.
Perhaps this is what the OP was alluding to when he mentioned "corruption". It's not corruption, it's sensible procurement practice for both buyer and seller. It's pointless for everyone putting out tenders for unicorns and time machines - which a lot of technology tenders effectively amount to.
I've never bid on anything where the customer has set the price and anything that came across my desk would go straight in the bin.
An interesting conundrum....
Do you have other directors in the business? What is their view? You haven't got a succession plan/number two to take over?
Could you appoint an NED to help you navigate some of this? It sounds like you need a plan - which will be hard to do on your own.
The public sector is not my area of expertise, but I've sat and chaired a few boards that needed significant change. It's a struggle!
Do you have other directors in the business? What is their view? You haven't got a succession plan/number two to take over?
Could you appoint an NED to help you navigate some of this? It sounds like you need a plan - which will be hard to do on your own.
The public sector is not my area of expertise, but I've sat and chaired a few boards that needed significant change. It's a struggle!
quinny100 said:
StevieBee said:
However, when doing work for the public sector it’s the client that determines the price. A budget for a project is set and is up to the bidders to determine if it’s viable and worth bidding for. The onus is on the supplier to be efficient and keep their costs low in order to maintain profitability.
It only works like that if you're being passive and blind bidding on tenders with an unrealistic budget. That's the road to ruin.Get in early in front of the right people, shape the project, help them develop a sensible set of requirements and budget. This gives you the opportunity to demonstrate your value and differentiation. Become a partner rather than a supplier.
Pre-tender discussion (other than via clarifications) with a potential client in my world is exceptionally rare and in many cases, if attempted, can result in you being excluded from the tender process.
It's not right but it is what it is. Over time, you get a feel or what's viable and what's not and bid accordingly. The largest single project I've ever delivered was won through a tender that I spotted on a tender alert service. Before the bid landed, the client didn't know we existed.
The only time we get to engage with a client in the way you describe is via soft-market testing. This does exactly what you say, enables us to help the client formulate an approach, budget and terms of reference that fit the bill.
Firstly, thanks very much all for your thoughts and suggestions.
Some things from this for me to take forward:-
Handover more responsibility to existing staff – have already started with this, making a conscious effort not to be in ‘every meeting’ and encouraging more direct client interaction from existing team members. Promoting staff is not really an option with current cashflow situation.
Approach potential sale options – it seems a sale would be the ideal situation in that the company could continue to protect our clients and staff going forward and also offer optimum extraction of funds from the company. I've begun approaching potential options.
Maximise income (charge more) – this is the tricky one, as has been noted, with public sector its rare that you get to input into the budget, it’s just presented as that is it, full stop. The main reason we are in difficulty is that there has been almost no increase in key project funding over the years and below inflation rises for the past decade. Since 2020 this has resulted in a cut of at least 30% in these projects. We have contract meetings upcoming this week, I am considering a bit of a nuclear option, to effectively say increase or we’re pulling the project(s). Contract discussions are always a farce, always only starting six months into the supposed contract period.. and often not finalised until the end of the contract period.. Thus we are often as now effectively currently operating not under contract which is a crazy situation given the significant national importance of these projects and their health related nature.
Reduce costs – I have not replaced a staff member that has left and also stopped a contractor. I am now considering further cuts and gathering the evidence to support redundancies – which in times of current employment regulations is not straightforward…
Obtain new projects – regularly searching for new tenders and attempting to exploit existing projects to bring in further funding. Getting in new work is currently proving to be a major issue, there just doesn’t seem to be anything out there. Any tips on obtaining new projects would be much appreciated!
Project cuts – NHS organisations are currently on a major cost cutting purge, several of our projects are now under review which is a further concern in that we are likely to lose some of these.
Thanks again for thoughts and suggestions going forward.
Some things from this for me to take forward:-
Handover more responsibility to existing staff – have already started with this, making a conscious effort not to be in ‘every meeting’ and encouraging more direct client interaction from existing team members. Promoting staff is not really an option with current cashflow situation.
Approach potential sale options – it seems a sale would be the ideal situation in that the company could continue to protect our clients and staff going forward and also offer optimum extraction of funds from the company. I've begun approaching potential options.
Maximise income (charge more) – this is the tricky one, as has been noted, with public sector its rare that you get to input into the budget, it’s just presented as that is it, full stop. The main reason we are in difficulty is that there has been almost no increase in key project funding over the years and below inflation rises for the past decade. Since 2020 this has resulted in a cut of at least 30% in these projects. We have contract meetings upcoming this week, I am considering a bit of a nuclear option, to effectively say increase or we’re pulling the project(s). Contract discussions are always a farce, always only starting six months into the supposed contract period.. and often not finalised until the end of the contract period.. Thus we are often as now effectively currently operating not under contract which is a crazy situation given the significant national importance of these projects and their health related nature.
Reduce costs – I have not replaced a staff member that has left and also stopped a contractor. I am now considering further cuts and gathering the evidence to support redundancies – which in times of current employment regulations is not straightforward…
Obtain new projects – regularly searching for new tenders and attempting to exploit existing projects to bring in further funding. Getting in new work is currently proving to be a major issue, there just doesn’t seem to be anything out there. Any tips on obtaining new projects would be much appreciated!
Project cuts – NHS organisations are currently on a major cost cutting purge, several of our projects are now under review which is a further concern in that we are likely to lose some of these.
Thanks again for thoughts and suggestions going forward.
getmeoutofit said:
The company is currently making some profit but this is ebbing away rapidly year by year (could be a loss this year) with continual effectively zero uplifts in funding, or cuts, increases in costs (NI, wages etc.), and an increasing threat of losing our core work projects - to be handed to foreign companies that are paid 10-20 times what we get paid, with a track record of non-delivery, standard corrupt public sector practice…
>snip<
Over the 20 years, both companies have built up significant capital (our family retirement fund), 2/3 of which is in company 2. It would be an absolute disaster for the companies to start losing money and for the financial security I’ve built-up over so long to vanish.
Given the trajectory of the company and the capital that you've built up; take a long, cold, hard look at your business.>snip<
Over the 20 years, both companies have built up significant capital (our family retirement fund), 2/3 of which is in company 2. It would be an absolute disaster for the companies to start losing money and for the financial security I’ve built-up over so long to vanish.
Is it viable? Does it have a future? Is it sustainable?
Don't think about what it "could be if only (xyz) happened"
Assume that your customers will continue on their current path, that times will - if anything - get tougher.
If you have doubts that the business is viable, sell it. Take your money out whilst it's still worth something.
getmeoutofit said:
Obtain new projects – regularly searching for new tenders and attempting to exploit existing projects to bring in further funding. Getting in new work is currently proving to be a major issue, there just doesn’t seem to be anything out there. Any tips on obtaining new projects would be much appreciated!
Diversify your core client base.For the best part of 20 years, we served only the waste management sector of public institutions. For context, we do behaviour change communications and the business was originally built when local authorities began to introduce kerbside recycling with oodles of money to support that with the sort of stuff we did.
The work started to diminish around 2014 and fell off a cliff from 2016. What projects did pop up became increasingly difficult to win and less viable financially.
Several people suggested we look beyond waste but I believed that this is what we were known for and what I knew best. It took me a couple of years to realise this but I was wrong.
Our core strength was behaviour change communications, not waste management - that was just something I'd acquired a lot of information about. I completely realigned my business and today apply the same approach to road safety, child protection, education, adult social care and broader environmental things. We still do waste related still projects but they represent only around 50% of our work.
It may not be possible in your line of work but have a look and see if you can look a bit broader, think a bit laterally.
Sounds to me like you need a NED or even 2 NED's on your board they'll help guide you to a place that works for you. Whether that's prep for sale of the company, stepping back to be a Chairman only. Reimagining the business/Pivotting etc to make it more profitable.
Try here: www.virtualnonexecs.com
Try here: www.virtualnonexecs.com
You've come away with a long to-do list.
e.g. looking at selling the business in its current state has the potential to rapidly turn into the business being perceived as a distressed sale with onerous contracts, and also become a second full-time job for you. This seems like the last thing you should do, unless you're just looking to offload the problems. A good CF adviser will tell you straight and advise you to first get your house in order, but other CF advisers/brokers may lead you down the process route depending upon their workload!
If you have contract meetings come up, all effort needs to be on those in the short-term. Defer the meetings if you & team are not ready. And cashflow management as you're going to need time and things generally get worse before they get better.
Good luck, as it will be a brutal period coming up, but at least you'll be tackling the problem.
e.g. looking at selling the business in its current state has the potential to rapidly turn into the business being perceived as a distressed sale with onerous contracts, and also become a second full-time job for you. This seems like the last thing you should do, unless you're just looking to offload the problems. A good CF adviser will tell you straight and advise you to first get your house in order, but other CF advisers/brokers may lead you down the process route depending upon their workload!
If you have contract meetings come up, all effort needs to be on those in the short-term. Defer the meetings if you & team are not ready. And cashflow management as you're going to need time and things generally get worse before they get better.
Good luck, as it will be a brutal period coming up, but at least you'll be tackling the problem.
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