Small firms 'unaware of true value'

MANY small and medium sized enterprises do not know the value of their business and are unaware of the various options available when looking to sell their company, according to the findings of a national survey for the Royal Bank of Scotland.

MANY small and medium sized enterprises do not know the value of their business and are unaware of the various options available when looking to sell their company, according to the findings of a national survey for the Royal Bank of Scotland.

The survey, carried out among small and medium-sized enterprise (SME) customers of RBS across the UK, showed the average return on capital for those businesses interviewed is expected to be around 10,000 per cent of the original investment. However 30% of the business owners surveyed admitted they currently had no idea of what their company was worth.

The research also highlighted that business owners looking to exit were not just concerned about finding the right price - many also expressed concerns about protecting their staff and ensuring the business continued to do well into the future.

At the same time, business owners were found to be relatively unfamiliar with the succession options available to them. Two-thirds understood what a management buy-out (MBO) involved, but when it came to cash-outs, management buy-ins, earn-outs or a flotation, awareness levels fell significantly.


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Of the business owners interviewed who rejected the idea of an MBO, 12% cited a lack of good management resource in the company as the reason, while 33% believed their staff would not be able to raise the necessary finance.

Paul Vale, director of structured debt solutions for RBS in the East of England, said: “Starting your own business is a dream for many and the concept of controlling your own destiny and not answering to anyone other than your customers is an attractive one. Taking the plunge and becoming an owner manager can feel risky, but the rewards, particularly those that are financial, far outweigh the concerns for many.

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“The research within this report has clearly identified that SME business owners require help with realising the value of their lifetime of work. The sale of a business is a life-changing process and therefore it is important that business owners enter the sale process for the right reasons and sell for the right purposes.

“It is vital that business owners looking to sell their business seek advice from a whole series of financial advisors to enable them to fully understand all options available to them.”

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