WealthTalk hosts Christian Rodwell and Kevin Whelan explore the complexities of business ownership, with a particular focus on the challenges of selling a business. They are joined by Chris Spratling, author and expert in preparing businesses for sale. The conversation highlights the importance of understanding business value, seller readiness, and the role of technology and AI in improving business operations. Chris shares insights into the exit process, stressing the need for thorough preparation and outlining common pitfalls business owners often encounter. The episode also explores the significance of building personal wealth alongside business ventures, as well as the emotional impact of transitioning after a sale.
In this episode, Christian Rodwell welcomes Chris Spratling—seasoned entrepreneur, advisor, and author of “The Exit Roadmap: The Insider’s Guide to Selling Your Business Profitably.” With over 30 years’ experience in scaling, buying, and selling businesses, Chris shares vital insights on preparing for a successful business exit, maximising value, and planning for life beyond the sale.
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Speaker 1 (00:00.13)
fact that a load of those business owners will just eventually shut that business or effectively give it away for little or nothing is a massive issue that I'd like to help solve. We keep seeing business owners who keep making the same mistakes. So hopefully by reading the book, people will learn how to overcome many of the hurdles that so many business owners fall foul of.
Speaker 3 (00:23.992)
Welcome to this week's episode of Wealth Talk. My name is Christian Rodwell, the membership director for WealthBuilders, joined today by our founder, Mr. Kevin Whelan. Hi, Kevin.
Chris, good to be with you again and just to let you know it is me. Just had a little week away celebrating a very special birthday for my wife. We did lots of interesting things, including some deep sea fishing, which I have to say we caught some wonderful sea bass, which we consumed with gusto, and a bloody massive shark, which obviously we didn't cook shark fin soup.
Yes.
Speaker 2 (01:00.072)
it back but but that was a bit of an experience so I thought I'd go bit of Captain Bird's Eye.
Yeah, well for those listening, we're talking about the beard, the new facial hair look for Kevin Whelan, which I like Kevin, yeah, very nice.
good for you. just noticed all of the good looking fellas and WealthBuilders, you you and Paul and Dan and like all the guys have got sporting good beards and the only ugly fella is me and I don't have anything. I thought if you can't be him, join them. But it'll only be for a few weeks until the wife gets bored or stops tickling her face and she'll go, now get rid of that thing, Kevin. That'll be me. But for a week while I was away or 10 days or so, just thought I'd leave to go anyway. Why are we talking about beards?
how
Well then, we've got a great guest today, haven't we?
Speaker 3 (01:45.016)
We sure have. And he's one of our members as well, Chris Spratling. He's a recent author. And that's really what we're going to be talking about today, which is his expertise around selling a business. And we love business, Kevin, but it can be tough, right? And for many people, the goal of selling a business actually never materializes. So Chris is going to talk us through, you know, how you can get exit ready, basically.
mean, there's a bit of a tragedy that goes on. I'm sure Chris will touch on some of the numbers because he knows his stuff inside out. mean, Chris is such a super smart guy. I did some research, Chris, on the average kind of value of businesses that sold because all the knowledge, all of the information when a business is sold is public knowledge because you've got to apply when you sell your business. You apply for a tax dispensation.
Used to be called entrepreneurs relief, now called very sexually business asset disposal relief. Anyway, apart from the government just cutting that back and back and back, the point is when you currently have a limit of a million pounds, you sell your business for, and you get up to a million pounds worth of tax credit at 10 cents. State it differently, if you sell your business for a million, you'll pay 10 % of that in tax instead of income tax.
other forms of capital gains tax, so it's a reduction. Anyway, all of this information is known. And what's staggering to me, and isn't a number that think Chris brings out, but I do, which is, first of all, there are five million businesses here in the UK. I mean, we are a nation of business owners, really, but only 5,000 in a year.
sell for more than a million. Now do the maths. I know you're not that great at maths, so it's 0.1%. Not 1%, 0.1%. So when we say most people do not come financially independent, and we talk about 5 % become financially independent, but only 0.1 % of business owners do. So it's actually harder.
Speaker 2 (03:57.88)
To create wealth when you put all your wealth in your business basket, which so often business owners do, they don't diversify their wealth. don't build wealth in multiple ways. tend to, my business is my pension. You hear that a lot. So Chris has got a wonderful book and a wonderful business opportunity and a wonderful service. And I'm so pleased for him that he's not just a great teacher and a great coach and a great mentor, but so open-minded because he was open to receiving.
At least what I could share on the wealth side of things. And he did that with his wife, Rachel, with great humility. And I appreciate him for that. You know, I'm sure he'll mention one or two things about my style in the conversation you have with him.
One of the things that will come out of the conversation today, of course, will be to look outside your business, your wider wealth plan. You worked with Chris on more of a mentorship level as well. So that was very much looking at other areas of building wealth.
Yeah, and so I kind of bag myself as the wealth coach, often for coaches, because a great coach is open-minded because they understand that in all aspects of high-quality performance in life, be it business, be it academic, whatever it is, be it sports, there's a need for that open-mindedness to receive wisdom from other places because they see and make distinctions you can't make.
yourself, if you imagine a golfer, you can't see your swing. You've got to have someone else see it. And similar with all kinds of sports. And Chris does the same thing, but with business owners. I think he calls them ambitious business owners. think that's the style of language you use. And I think he's quite right because it's a business owner who sees something else than just the doingness, the tyranny of the routine of being in business, which all too often
Speaker 2 (05:51.95)
The very freedom that business owners seek creates the very web that constricts them. So I think the ability of Chris and his team at Chalk Hill Blue is to break that net, that webbing and free people with a different way of thinking. So rather than wax lyrical about Chris and his team, why don't we head on over and have a listen.
Yeah, I think it's time for us to have a listen to our conversation today with Chris Sprattling. Chris, welcome to Wealth Talk today. How are you?
Great, thanks for having me on Christian. Great to be here.
Yeah, and you're no stranger to WealthBuilders, Chris. I know you've been working closely with Kevin over the last couple of years or so. So how's that relationship been?
It's been great. You'd expect me to say that obviously, wouldn't you? But seriously, no, it has been. Working with Kevin's always an uplifting experience, if not a challenging one. He's great at challenging you as a business owner exactly on what you want and how you're going to go about it. But the advice and guidance has been, well, insurmountable really, unsurpassable.
Speaker 3 (06:58.19)
we talk about the seven pillars of wealth at WealthBuilders. We're very much focused on the business pillar today. And what are some of the other pillars perhaps that you've been exploring?
we've clearly set the SAS up. We've got a fairly sizable commercial property portfolio within the SAS now. And I think for us, with recent changes around inheritance tax, it's just now starting to think ahead about how we use that recurring income appropriately and minimize the inheritance tax position for our kids being slightly older in years than perhaps some of your listeners are.
intellectual property as a key pillar. We're to talk a little bit about today, I think, in terms of the book that we've created. there's four or five key pillars for us that we follow passionately and perhaps didn't understand the interdependencies between them all until we started working with Kevin and the team at WealthBuilders. yes, it's been great.
No, it has been great to have you a member of the community. We talk about being outstanding in your niche. I think it's fair to say that you are, Chris, and decades of experience has led to the book that's recently been published and congratulations on the success of that so far. We'd love to ask you some questions about the topic of growing a business, exiting a business, all the things that go alongside that. Tell us a little bit more about who is the typical avatar that you work with at Chalk Hill Blue?
So we tend to attract highly ambitious entrepreneurs who tend to own and run privately owned SMEs. They tend to be in that 2 million to 30 million range. We've got number of clients that are slightly bigger than that, one or two that are slightly on the lower end. But we're often the second, if not the third time that that entrepreneur is invested in some outside help. And I think what we're well known for today is helping businesses really scale.
Speaker 1 (08:48.8)
some of which will ultimately want to exit. the principles of scaling go hand in hand with ultimately setting up a business so that it reaches maximum value when you do indeed want to exit. we're very privileged. It's a great group of clients that we get to work with. We have a lot of fun as well as working really hard, but the rewards are fantastic.
And what in particular was the trigger, the catalyst, the turning point where you said, okay, look, I feel that I can actually now start helping other business owners.
I think you change over time. I certainly know I have. think if you met a 25 to 35 year old Chris Sprattling, you'd have found someone who was quite focused on himself, maximizing his own income and wealth. And that served its purpose at a certain point in time with a young family and so on and so forth. But I think you get to a point where actually you realize there's more to life than just money. And I'd got a real buzz out of developing teams.
I'd come from a professional sports background originally where, you know, I'd been part of highly successful teams. I was never the leader in those teams. I was never the most talented in those teams, but I knew what my role was. And, you know, the combination of everybody knowing what their individual roles and responsibilities were to provide this high performance output, you know, was really exciting. And I love doing that with clients today and helping them maximize their performance. Just happens to be in a business context mostly.
And I'll ask you a question that I often hear myself when I'm listening to business podcasts is, you think entrepreneurship can be taught or is it something that you're born with?
Speaker 1 (10:27.138)
No, I definitely think you can learn it as long as you've got the right attitude. I think you can teach most people just about anything as long as they've got the right attitude. But of course, we do meet a lot of very clever people, intellectually bright, who aren't necessarily commercially sharp. And I think there is a difference between the two. And until you realize there's a difference between the two, you'll never truly optimize that performance.
And would you say in business, the importance of having a good network? So not needing to know everything, but just having the right people around you.
Look, think, again, if you take a sporting analogy, most people recognize that they can go so far on their own, but actually you would employ expert advice, coaches, mentors, etc. to help you optimize that performance. Football teams don't win European championships and things like that and then suddenly sack the coach because they think they know it all. They keep going and keep reinvesting in themselves to get better and better. It's those marginal gains.
The focus really of the conversation today is about exiting, getting the business ready so that you can sell. Why should you be thinking with the end in mind from the beginning and why do many business owners not start there?
It's a much hackneyed phrase, isn't it? Start with the end in mind. When you come to selling a business, it's not just about finding a buyer. It's about finding a set of buyers who will pay a premium for your business. know, most of us will only ever sell a business once. And consequently, it's rather weird, but we don't put a lot of effort into understanding what it takes to sell a business successfully.
Speaker 1 (12:10.958)
When you look at the stats, they're fairly scary, really. So less than 20 % of businesses that will be listed for sale in the next 12 months will actually ever sell.
Which is kind of crazy, right? When you put all of this effort into building a business, building your personal income and so on and so forth. I IFAs generally have a figure of around 80 % and that's 80 % of an individual's wealth is tied up in their business, particularly in the SME world. So as to not to get full value from it at the end, whenever that end is, it's kind of disheartening, isn't it?
The fact that a load of those business owners will just eventually shut that business or effectively give it away for little or nothing is for me a massive issue that I'd like to help solve. And then that's part of the reason I wrote the book. We keep seeing business owners who keep making the same mistakes. clearly I can't work with everybody, just a very small select few, because that's all we have time to do. So hopefully by reading the book.
people will learn how to overcome many of the hurdles that so many business owners fall foul of.
Yeah. In the book, you mentioned over 50 % of business owners are unhappy with their exit. Why do so many leave money on the table when they sell?
Speaker 1 (13:34.488)
There are numerous reasons, but most overestimate the value of their business. Most fall into this trap of saying, well, I've spoken to my accountant or I've spoken to other business owners and the business like mine typically sells for a multiple of X, you know, of my adjusted EBITDA, let's say. In reality, that's just not true. We've had many examples over the years where
businesses in the same sector have sold for completely different multiples. The multiple is something you probably work out after the deal has been done because there are just so many variables. Different buyers will value businesses in different ways. Different types of buyers will again find different businesses attractive or not, as the case may be. It's a complex landscape. I think if you don't understand it, the danger is that you leave plenty of money on the table.
simply because you didn't know what to do in order to structure your business for the maximum exit.
So maybe it'd be actually helpful, Chris, if you don't mind, to walk us through the main stages of preparing a business for exit. So our listeners get an idea of what that looks like.
We already touched on the fact that you'd ideally start with the end in mind. And I think often when we have these conversations, we talk almost entirely about how do we ready the business for sale. But actually for me, I think there's an important first step that's nothing really to do with the business per se. And that's all about seller readiness. So in the book, we spend a fair bit of time in the early part of the first half of the book, looking at what it means to be ready as a seller.
Speaker 1 (15:16.76)
So understanding what are our motivations for selling? What do we need? What do we want from an exit? So interesting, there's a great overlap here with what WealthBuilders does. Do I actually know how much my pension is worth? What it's going to yield me in retirement? And does that actually match my retirement plans if I'm at that stage? And again, kind of scary.
I think about all the business owners we've worked with over 20 odd years, most of them haven't got a clue. They don't understand the true value of their estate. They don't understand what their pension, if they've got a traditional SIP type pension is going to yield them. They don't understand what other investments they might need and so on and so forth. Most business owners, particularly independent business owners, will think of their business as that pension in some form or other. So to understand how it
plays a part in building that overall wealth journey, think is massively important. The other thing about that seller readiness is equally about understanding that deals can take many forms and shapes and forms. And so it's about understanding not just what I need the transaction to be worth, but how I'm prepared to see it structured, the timeline over which I'm prepared to do that deal.
And equally for many business owners who've grown a business with the help and support of a longstanding loyal team, you know, it's also about how that new owner will behave and how they will treat the staff that I ultimately leave behind when I sell. And so there's lots of things like that around seller readiness first, but I think we have to get right and get clear because until we're clear on that, we don't actually know how to build our business to tick those boxes.
I then think you come into the more traditional topic of conversation, which is how do I build a business that is saleable for maximum value? And there's lots of talk about drivers. We talk about 10 drivers in the book. Others have said there are six. Some have said there are eight, et cetera. We tend to think there are a couple more. But every one of those 10 drivers is essentially pouring water into your valuation bucket.
Speaker 1 (17:42.092)
Or alternatively, it's not there, it's draining water out. So those drivers cover many aspects. Clearly, most buyers are looking for a strong history of growth in that business. So it's where the scaling up of the business comes in. But they're also looking for that business to still have the potential to scale further. So as a seller,
You've got to understand that when you sell, yes, that's the end of your journey. But for the acquirer of your business, that's just the start. So they've got to bear to see how they're going to get to return on their investment that they're making in buying your business from you. Not all revenue is great revenue. That's the other point to make around probably our third driver. ideally what we're looking to create businesses with strong recurring or repeatable revenue.
so as to give buyers in particular comfort that the future performance and the future ability to scale it is there. Because what we're trying to do in any sale process is overcome any risks that a potential acquirer might uncover or want to discuss with us as part of due diligence. I think there's then a piece around what sort of business is this? Is it a highly differentiated business? Does it have a strong market share?
What are the USPs of the business? And again, we see businesses that have strong points of differentiation typically outperform competitors in that sector when it comes to taking that business to market for sale. There's then probably two or three key drivers around reliance or what we refer to as over-reliance. So we're looking for businesses that are first and foremost not really reliant on the founder or the ownership.
team because if they're going to leave at some point after the transaction. At the same time, we want to make sure that the business isn't overly reliant on anyone who's left behind because, as employees, they could leave at some point, too. you know, strong system, strong processes that say that the business still works despite someone being on holiday, often long term sick or indeed leaving the business altogether are going to be important to an acquirer.
Speaker 1 (20:08.182)
And the same is true of making sure that the business isn't overly reliant on any one customer or doesn't have a huge concentration in a small number of customers or indeed suppliers is going to be pretty important to an acquirer. Outside of that, I think we get into drivers around things like the working capital in the business. Does it have a strong working capital? Is there a high level of loyalty? So again, increasingly,
With the larger transactions, we're seeing things like the net promoter score being more more important to acquirers, particularly private equity buyers. And again, coming back to some of those pillars, intellectual property is seen as a real point of difference and indeed a real driver of value in a lot of businesses today. So again, as a seller, if you can demonstrate that you've got strong intellectual property, it's well protected, then
Ultimately, we're going have a much better opportunity to persuade a buyer to pay a premium price for this business.
That's very, very helpful. Thank you, Chris. And I want to come back to a few of those points in a second, but also want to mention that you've also got an exit readiness survey, haven't you? Which someone can go and take that and find out about all of these aspects to see how far they're measured.
absolutely free. It's on the Chalk Hill Blue website. It'll take seven or eight minutes probably to complete the questionnaire, but off the back of it, you'll get a personalized report. I think it's about 15, 16 pages. There's no follow up. There's no sell to it. Just go and use it and get the value from it.
Speaker 3 (21:48.706)
You mentioned a lot of things there. If you were to sit down with a business, say you've sat with me today and go, right, let's have a look at WealthBuilders, would there be some quick wins? Would there be some immediate things that even listeners now who've got a business, they could do themselves, which would create a kind quick impact?
I think, again, you can split this into two. What are the things you can do personally and what are the things you can do in your business? know, quick wins personally. Go and really understand, you know, what sort of value you've got in your investments, know, particularly things like your pensions, and understand what you think the gap is likely to be at the point at which you think you're going to exit or retire or both.
I really would advise your listeners to take some expert advice on all of that. decent IFAs and wealth management firms can advise on where you're at and what the gap might be and so on and so forth. From a business perspective, the first step I would actually do is go back to that survey we've just talked about. Go and identify in your individual case exactly where the biggest gaps are and just focus on one, maybe two.
Don't try and do it all because you won't and not all of them are quick wins. But for each of those 10 value drives, there'll be some opportunities there for sure. And I would pick the ones that you think are most relevant to yourself.
Processes, I know that's important. You mentioned there that the business needs to work without you and if someone drops out, then you need to have a process that anyone can kind of step in and pick up. Have you got a tip at all on how to approach that? So a business that perhaps knows they're lacking in their processes. It's a big job. It might feel very daunting. Have you got any recommendations how to tackle?
Speaker 1 (23:41.134)
I mean, look, start with what's going on in the world today. You know, we all hear huge amounts, don't we, about AI and automation and so on and so forth. You know, I advise clients all day, every day, you know, what are the things that frustrate you most? Write that list and let's see how we can address those now. Work out, you know, are you spending your time on the high value tasks or lots of mundane administrative rubbish? What are the things you need to let go of? So I'd start there automating those.
using AI responsibly to address some of those things and just start to focus again on the bottom line benefits of making some of those process changes. They don't have to all involve technology. Some of them can just be done by saying, how could we do this particular task better tomorrow? So often in businesses, we see that people will tell you, well, we do it that way because we've always done it.
Well, why? Actually, when we look at it, we often conclude, yeah, it doesn't really add any value anymore. Some of those things we can just stop altogether because things have moved on and others just a small tweak or putting it into the hands of someone different within the organization. Now the organization has grown. It is enough to streamline those things and drive productivity.
Have you seen any examples, Chris, of businesses now that are looking at obviously the advancement of AI and either it's a risk and a threat to the future business or they're seeing it as an opportunity and any examples of the pros and cons of AI coming into things?
I probably live in a bubble. So my reference point is the clients that we work with. And genuinely, I don't know a single client that isn't fully embracing automation and or AI right now. So from some very basic things using tools like Copilot to record virtual meetings and publish minutes and action points very, very quickly after the meeting and using other bolt-ons to
Speaker 1 (25:51.362)
make sure tasks are actually completed on time to the required standards, all the way through to applying AI to look at optimum journey times for Salesforce's and team members that are out on the road, service delivery teams and so on and so forth. It really is something that our clients, at least, are embracing fully. One of the other businesses I own is an accountancy practice.
AI is going to fundamentally change the way we operate as a business. The basic bookkeeping tasks, as done by junior members of the team often, it will go. But it won't replace those staff. They will just do higher value added activities and more advisory based services for clients so as to help those clients grow their businesses much quicker, much more efficiently, and so on.
Personally, think in responsible hands, AI is a great tool. And again, I encourage all our clients to spend a significant amount of time each week learning about AI and being curious as to how it can help them grow their business and improve the bottom line.
Now, family wealth is at heart of what we do at WealthBuilders and you have a big family itself, Chris. How do you advise founders to handle internal transitions, especially when it's family-owned businesses?
bit like coaching generally. It's about education. And so I'm a massive fan of the things that you guys have been championing for a number of years now about educating different generations about the importance of understanding how wealth is created and how it's passed down throughout the generations. So I think that's something that we talk lots to clients about and others within our network.
Speaker 1 (27:48.47)
Again, not every client will be the same. And so I think it's about understanding, you know, what are the options and picking the best ones for an individual and helping them navigate that complexity. think, again, not unlike what you guys do, I spend a lot of my time helping clients unravel the complexity and implement practical steps to work towards their individual personal goals.
And all too often we get tied up in business and other activities and we don't put enough time thinking about the things that are truly important. so we're big fans of take a step back. Why are we doing this? Why am I working so hard to build this business? What's the real motivation? What's the outcome I need? I putting my time into the right activities? Am I focused on things that really make a difference?
to that top or bottom line.
And does that tie in with the concept we talk about, sort of creating freedom before you actually sell? So, you know, not waiting until, you know, that end point.
I think it does. think the freedom point is also amplified by the fact that an exit is often seen as the only way to realise the value from a business. It may not be the right option for some business owners. Sometimes it might just be, I want to step back and carry on taking a great dividend from my business, whilst somebody else runs it for a period of time.
Speaker 1 (29:26.272)
I might want to step back and pass it on to the next generation. But, you know, in that process, how do I educate them on how to run it and not only just run it and keep it ticking over, but how take it on to the next level? I mean, we have one client that we've worked with now for a couple of years and he's the fourth generation to run that business. If I'm honest, he's on paper a much better custodian of that family business than
three previous generations, he's more than quadrupled it in the last two years, whereas previously it had been pretty stable for at least two generations. It's about curiosity and it's about wanting to really understand what have I got as opportunity here, I think, for me.
know Kevin often comments when he's speaking to groups of business owners and he says to them, know, so, you know, when you're thinking about selling your business and the answer is always in about five years or so. you know, in your experience, Chris, you know, how long does the process take? Is there an average kind of timeline? And if someone was thinking of selling in about five years time, when should they start to be beginning the selling process?
I'll answer in a circuitous route. My heart always sinks when I get an inquiry from somebody who says, can you help me sell my business? And they say that they want to sell it in the next six months because if ever that's way too short a period of time to sell it and get maximum value for it. So as a general rule of thumb for those businesses that are brought to the market today, I think you should expect a timeline of nine to 12 months.
on average to sell that business, assuming it's in a saleable state. Most of the clients we work with and they're good, well-run businesses, still take a good 18 months to two years to get into a state where they're truly saleable and saleable for hopefully optimum value. And there are many, many factors in that. every case is unique.
Speaker 1 (31:32.91)
generally a minimum of two years worth of prep, I would say, and probably a 12 month period to actually go through all of the nuances of the sale process to complete. And then bear in mind that most deals today are done where you don't get all of the money on day one. Quite often you're going to get 65, 70 % of it with the remainder over perhaps one or two years to follow. And you might be asked to stay on and do a handover six, 12, 18 months.
depending on the size and the complexity of the business with the acquirers. it's a lengthy process and it's definitely not like selling your house.
Is there a marketplace? know, typically businesses going onto a kind of brokerage. it word of mouth? What are the options?
There's some interesting stats again from the corporate finance world and the broker world in that I think they would all typically estimate that somewhere between 25 and 40 % of businesses are sold ultimately to someone that you know. However, from where we sit, we would always advocate that the seller, the owner of that business as part of the sales process enlist industry experts.
to support themselves throughout that sale process. So essentially put together what we call the deal team. And that would include wealth management, IFAs, specialist tax advisors, corporate finance stroke brokers, commercial lawyers with &A experience as a minimum. One or two might like to have a business coach accompany on the journey to. And I think you have to put all that stuff together in order to get optimum value. And I would always advocate
Speaker 1 (33:17.096)
using a professional outfit to help market that business for sale. It's not like, as I say, putting your house up for sale and sticking a board outside and hoping somebody drives by and offers you a decent number. Today, again, I think in the UK market, if you look at all transactions in a typical 12-month period, roughly 40 % again of transactions are with an overseas buyer. How they going to find you unless they're marketed to properly and professionally?
And so what you'll find is most of the corporate finance houses, brokers will have extensive databases of who's in the market, in particular market sectors, who's acquiring, you know, and so on and so forth. But of course, again, it depends what sort of acquirer you want to attract. You know, there are multiple options. You you could be looking for an internal sale to a management team. You might be thinking about an employee ownership trust.
Another option today, which is becoming increasingly popular given the tax benefits associated with an EOT. You might be looking for a trade buyer. So that might well be where the known entity comes into play more often than not. But again, you might be looking at strategic buyer or indeed a financial buyer and or some of a hybrid in the form of a family office. So part of readying the business for sale is identifying
how many of that five or six that I've just listed are appropriate to you and that you want to appeal to. Because again, they will all value your business in different ways. They will all be motivated by different things that they see in your business. And so the optimum price that you achieve is ultimately derived from creating real competition in the sale process. So whilst you may not be able to attract all of those five or six different options,
You probably want to position your business in the run up to taking it to market to be attractive to a number of them so as to create that competition.
Speaker 3 (35:16.758)
I think you've made it very clear today, Chris, that this is an area that you need to know what you're doing and you do need professional help around you. It can take a long time, but the outcome, if it goes the right way, can be life-changing. once it happens as a founder, what advice have you got, Chris, for navigating that next chapter after the sale?
Well, again, I think it comes into preparation and seller readiness. So again, one of the things I didn't touch on earlier when we were talking about the importance of that first step of seller readiness is understanding what you're going to do next. It sounds sad on one hand, it sounds ridiculous at the same time, but genuinely, I've got countless stories of sellers who've sold for large sums, you know,
and then actually ended up with depression, divorces, all sorts of midlife crises, you know, because they haven't really thought what they're going to do next. And if you think that often businesses are all consuming to a degree, you know, to suddenly find I haven't got anything to do, I haven't got a plan at how I'm going to spend my time. Now I haven't got to go to work five days a week. You know, it's quite challenging, you know, you know.
What essentially you're talking about is a change of identity. You know, I was previously owner of this really successful business and I'm now what? So it takes some thinking about how I'm not just going to spend the money and enjoy life, but how am going to fill my time? You know, what is the new me? I genuinely think it's a big question that many of us don't have the answers to, even though we think we're going to sell our business sometime in the near future.
Chris, thank you so much for sharing everything with us today that you have done. I'll just give our listeners a reminder that the title of the book is The Exit Roadmap, The Insider's Guide to Selling Your Business Profitably. And Chris, if anyone wants to connect with you online, find out a bit more, where should they head to?
Speaker 1 (37:22.094)
They can either head to the Chalky or Blue website and contact me that way or alternatively love to be connected on LinkedIn and pursue a conversation that way. yeah.
We'll pop all the links in the show notes for today's episode. Chris, thank you once again.
My pleasure. Thank you, Christian.
Speaker 3 (37:39.522)
All right then. So thanks to Chris for sharing all of those insights. I think one of the quotes I picked up on there, Kevin, when selling a business, it's not just about finding a buyer, it's about finding a set of buyers who will pay a premium for your business. And I think this is the difference of working with experts, isn't it? It's that they really can help you to maximize the value from your business, which you might not be able to do that by yourself.
think that's inevitably the case. And if you're going to put in blood, sweat and years, then you need to get the maximum result from that. the challenge for most people is they don't get the maximum. They don't maximize their outcome. They sort of minimize it. And partly the reason for that is not understanding the buying process. I mean, look, I think it was Shakespeare, wasn't it? That said, all the world's a stage and we men and women have our entrances and our exits and everybody exits a business.
There's no business that is not exited. You my father exited business, didn't he? You know my dad's story, but he didn't have a business succession plan. He didn't have so many things in play. So when he died, that was his exit strategy. Well, what we want is for people to have an incredible result from putting in, taking that risk, you know, being so consumed often by their business. And as I said, sometimes
Even the very freedom they get, they lose a bit. They miss out on school things for the kids. They miss out on many aspects. This work-life balance can sometimes get blurred. So you definitely need to get the maximum. And the way to get the maximum, it's not the only way because there are many ways to sell a business, but the maximum way is to find a buyer willing to pay a premium. Because anybody can buy a business at rock bottom price.
And anybody could sell a business when they're in a state of stress like divorce or disease or in my father's case, death, know, the three dreads, the three D's. So I think it's important to pay attention to what Chris had to say about getting a premium. And the premium is always going to be driven by, he calls the drivers. He does a good job of explaining in the book anyway, all of the drivers and I've touched on some of those with you.
Speaker 2 (39:57.762)
And some of those overlap with ours too, don't they? Working in a business that can ultimately work without you. That's a key one. Being outstanding in a niche, which he frames as differentiator. The ability to create recurring income as opposed to having, you know, income, is either time for money, product for money or service for money. And a few others besides that, like, you know, not having your business dependent on any one supplier, one member of staff.
whether it's the founder or whether it's the staff left afterwards. you know, so, so I think the premium is the best way to get a premium. need to have all those things in play. Otherwise you won't get a premium and the great source of disappointment for business owners. I think Chris did touch on one number, which is the vast majority of people who want to sell their business simply can't. It's not like selling a share portfolio or he calls it, you know, I talked about selling your home.
It's not the same thing. The valuation isn't is not a general. You can't just look something up and say this is the value of a business. And there's always, always a mismatch, an incredible mismatch often between the value somebody's put their life's work into and the value that somebody's willing to pay. And ultimately the premium payer wants one thing more than anything is predictability of profit.
And that predictability comes from having all those drivers in play. Otherwise, if you think about it from a house point of view, know, somebody can come and look at a house and get a survey done within a few months could have bought that property. If you want to sell a car, you know, you could do that. Yes, there are lag times, but the lag time of selling a business is years. It's not weeks. He talked about, you know, he dreads it if somebody says I want to sell in six months. It's just not enough time.
And here's the thing that really strikes me about Chris's observation of if it takes two years-ish to put in really good preparation to maximize the premium, and then it takes a year to identify the right kind of buyer, and then it takes maybe one or two years more for the buyer, the acquirer
Speaker 2 (42:20.686)
to know that predictability is in play, hence they will often create something called an earn out, you know, where you don't get all the money day one, you know, it's not like a house, you sell the house, you get the money. You know, nobody comes back and says, I didn't really like what you did to the garden. want some money back. You can't do that. So, but with a, with a business, they can, they can hold back, you know, so I think there's, there's, there's something odd to me about
putting all those eggs in that one decision and being in the end held ransom because you don't have the right predictability or the business acquirer has not seen that predictability, which why we talk so much about recurring income. If you've got a recurring income business, you've got such an incredible opportunity to give the predictability to the business acquirer because that's what they want more than anything else.
Cause they, they fear that if they got it wrong, if something went wrong in their due diligence and they paid you, you know, seven figures or multiple sevens, you then they're carrying a baby, they're carrying a lemon, it's going to be squeezed and cause a pain for them. And they definitely don't want that. So wise words from Chris. And I think there's an incredible overlap between Chris's observations about business and our observations about business. But anyway, I was, I was circling back cause you know, I like to get on my horses always.
that if it takes, say, five years, if that was reasonable, anybody with a good business could reasonably put the drivers in play, find and negotiate the right kind of exit, make sure they've got as much predictability in place so they keep more of the money at the beginning.
If it takes five years to do that, wanna build wealth and center, wanna take those same five years and use some of the revenue from the business that you're putting in to generate recurring income streams that will not only give you experience of doing that, the experience of working out the different ways, the different recurring income streams that you can.
Speaker 2 (44:33.048)
building we teach all of that in WealthBuilders and Chris has been an absolutely wonderful student as well as I said earlier on and has built some incredible assets. He mentioned SaaS, mentioned commercial property, he's mentioned buying other businesses, know, so Chris has gone on steroids, but I think the only thing that we can lend credit for, I think, is the structure. You know, and I think he admits to that, that we gave him a kind of sense of the whole.
Whereas he might've been doing these things a little bit ad hoc, but anyway, couldn't hold the guy back. It's just incredible powerhouse. But the other point though, Chris, about that is if you start to build your wealth, then you don't need to rely on the final exit price. Because if you take Chris advice and get him, you know, what did he call it? Be seller ready? You know, if you're seller ready, you know what you need in order to be wealthy for the rest of your life. It isn't always a set number.
It could be, if, you know, try and give you an example. If you believe you want to sell your business for 5 million quid and you hang on to some notional figure, but if you take five years and you build your wealth through recurring income, taking some of the corporation tax that you're paying anyway, redirecting it to build your wealth, which you can do. We know that. So if we can claim back corporation tax, build wealth with it.
which then gives, let's say, I don't know, call it 10 grand a month. You get 10 grand a month coming in automatically. You'd ideally like 20 grand a month coming in. Well, you only need to sell the business for the equivalent of another 10 grand a month. You know, so if you can get 5 % on your money, you only need 2 million quid for your business, you know, so you don't need a maximum. You've got power of negotiation because you've got
wealth on your side while you're building your business. And another subliminal benefit of this, again, Chris made some great points, is he talked about identity. If you've got an identity that's fundamentally wrapped up in your business, you know, I am the founder of ABC XYZ. And then all of a sudden you sell your business and you may be forced to become an employee of that business and you lose your identity and you don't want to be an employee really because
Speaker 2 (46:58.382)
That's the reason you got into business in the first place is not to be an employee. Maybe, well, certainly for me anyway, it's one of them. Then if you're in a position where you've taken a lesson from us, let's say, and not built one business, but two. Business one, the business you're going to sell. And business two, your family's wealth business that you're going to keep forever. And then your identity melds.
from the founder of the trading business to the founder of a wealth business that supports your family, not just while you're alive, but for the next generation, the generations after that, and the generation after that. So you become a pioneer of your own family's wealth. And I think that's so laudable. I think that's such a powerful concept that if you take the same five-year timeframe, take five years, get your business ready, but take the same five years, put some of that time.
into building wealth in parallel, you can basically step off one and get on another rather than feeling you've dropped off a cliff and where's your identity. You knew it everything. You've got no credibility with anybody for anything anymore. know, cause nobody values that nobody's going to say, well, how much did you see? Cause nobody tells anybody what they sold their business for. You sell your business for 5 million, you 5 million in the bank. Well, you got to pay your tax, but let's say you've got a few million in the bank.
It doesn't do anything for your ego because it's not about spending the money because our identity isn't tied up with how much money we've got in the bank, but what it is we're doing with our life. And for me, my life's work and the life's work that we have is to educate other people to become financially independent, firstly for themselves, and secondly for the generation next, and thirdly for the generations to come after that. And this whole idea.
of the family wealth business that turns into a family wealth fortress is an incredibly powerful one that I hope somebody's stayed and listened long enough to take on board what I'm saying, especially the business owners out there who probably just get on with doing the work and the day-to-day that they've been doing for the last x number of years.
Speaker 3 (49:16.448)
There was a lot there to digest and very good too. I was going to say something which switched about five or six times throughout that. But one thing I was just going to mention is for anyone who's new listening to this and thinking, well, what are you talking about when you say build wealth alongside your business? We're talking really about the seven pillars of wealth. Taking money from your business could be going into investments, going into your pension, potentially going into property, those areas.
So we talk about the seven and only seven ways to create recurring income and their drivers as well, like Chris's driver. And you turn money that you've got and ideally, if you've got a limited company, you turn the business money, Because instead of paying corporation tax on it, you redirect that money to build assets. So you can build a portfolio of property, you can build a stake in other businesses, you can build multiple other assets and anybody who wants to know what...
The seven assets are can, I suppose, just get a copy of our book. Not that I want to dissuade anyone from reading Chris's, I definitely do not. But I think if you get the idea of the business one is the business that you're in and business two is the business of your wealth. And if you join them together, you've got an incredibly powerful combined vehicle, a turbocharged vehicle that would serve any business owner. Because if you do one without the other,
You've got a weaker outcome, a weaker outcome for your business. If you don't sell it, then you've got nothing for it and a weaker outcome for your wealth. if again, if you've got five, here's the thing, Chris, it's a scary thing. I've met business owners who've got multiple millions in the bank. They don't know what to do.
They're fearful now because they don't know what to do with the money. They're fearful of the stock market. They're fearful of any investment. They're fearful because they've worked so many years for this. They don't know what to do with the money. And they become very risk averse instead of building wealth sequentially on not on creating more value, but turning.
Speaker 2 (51:33.068)
almost repurposing the money into a self-replenishing money, recurring income streams that last forever, as opposed to having a few million quid in the bank if they ever sell, which we know is only 0.1 % anyway. But those who do, then the money is getting depleted month by month, year by year. And they feel very nervous about the legacy for the next generation as well, because they don't want to give it away because...
They've got nothing else to fall back on, but the money they got from the sale of their business. So you see how all this has joined up.
Much so. One final thing I'd like to mention, Chris did refer to employee ownership trusts as another exit strategy. We did actually record a podcast way back, episode 103 with Chris Budd. For anyone who'd like to learn more about EOTs, employee ownership trusts, click on the link in the show notes and that will take you straight to that episode.
I mean, EOT is a very popular way now. It's a growing way. And I think Chris makes a point about one of the drivers for many business owners. It's not just about the money. They want the respect and appreciation of the staff members, of their past customers and existing customers. You know, so they want the of serving people to continue after the sale of the business.
And one of the ways that can happen is the employee ownership trust, which is supported by government. In fact, if you, if you imagine, you probably heard of Waitrose, you know, we all own the business. are partners in the business. Another great one, which again, it's not generally public knowledge EOTs is the, the Wallace and Gromit guys, hard man. They're an EOT and an employee ownership trust is essentially
Speaker 2 (53:27.416)
doing all the preparation Chris talked about, getting your business ready, but instead of selling to the acquirer, you transfer the control and ownership into the team who are currently managing the business. And there are some skills and some processes and yes, you could refer to the other podcast on that, but in simple terms, one of the big benefits is if you sell a business, remember you get a million pounds at 10%.
and the rest is at 20%. If you sell your business to an EOT,
Speaker 2 (54:07.16)
So whatever the value of your business, you often negotiate hard, you? Because you've got a value of the business. Yes, it needs to be independently valued, it's no longer so much about opinions, about fact, about the financial metrics, which you can definitely nail. And then when your business is sold to the trust, you get all the proceeds, whether it's upfront, if there's money in the business or gradually over time, then you can get all of that money out tax free.
And zero tax. mean, what a way to exit business, know, no tax. And you can still have an interest, you can still have a degree of control. You can still be involved if you want to. So for many business owners, it's a cake and eat it outcome. And the staff get a benefit too, not just the feeling of ownership, as you definitely notice with people like the John Lewis Barners, but also they get a tax-free benefit as well of up to 3,600 a year as a bonus tax-free.
So, you know, what's not to like about that? Never ever say one thing is better than the other. Your premium is going to come from the acquirer.
But there are other exits as well, including the death exit. It might do nothing and hope for the best and die or get ill or try and pass it on to your family members. If they're interested. was speaking to a guy only today, Chris, who said, I've got a business. It's a property business. And I've got two kids and none of them want it. None of them are interested. And it's like, well, that's okay. Cause they don't need to be interested, but it means you need a different strategy.
You need that business to be managed or run in a different way by somebody else if you're getting too old to be able to do that. And we see that so often in things like breakfast and old nursery schools, you know, where the owner's getting older and tired. just want, they don't want to denude the asset. They don't want to sell the asset. They want to keep the asset because it's got a recurring income. So there's multiple ways.
Speaker 2 (56:14.558)
selling a business, Chris, we could do a whole podcast on the five different ways of selling a business. And I could probably stretch that to seven because that's what I normally do. And I'm sure we could do that. And if you want to do that, table that. In fact, why don't people ask if you're interested in creating a podcast or was creating one, the seven different ways you can sell a business. We'll create that in the coming weeks. Just how would people do that, Chris? How would they let us know if they're interested?
Yeah, lots of different ways. You can hit us up on your favorite social at WealthBuilders on Instagram, Facebook. You can drop us an email, hello at wealthbuilders.co.uk. Or if you're listening on Spotify, they now have the option to leave star ratings and comments. So feel free to comment away, let us know that you're enjoying these episodes. And if you'd like to leave us a five-star review, then we'd be very grateful for that.
Yeah, we would look at, we, we obsess about giving good value. We seek out the best guests in the world. mean, you can't argue. had a world-class guest today and the more we find success stories in other people, not just those who've worked with us, but it helps that, you know, we've got a great relationship with Chris and his wife, Rachel, but you know, it's fun to hear that people are making
their life completely different and the lives of their children completely different. I think you mentioned it Chris, sometimes these things, these decisions can be life changing. But I want the life changing to be a life enhancing, not just changing because sometimes the changes can be negative ones.
Thanks again to Chris that definitely provoked a stimulating debrief there. Don't forget, you can still grab a copy of our inheritance tax guide, which we're just putting the finishing touches to. We have the waitlist at wealthbuilders.co.uk forward slash iht. Kevin, who's that guide for?
Speaker 2 (58:09.042)
Anybody who's got a pension, anybody who's got a family, which is a pretty wide selection of people because there are definitely the pensions and the government with pensions on the warpath. Okay. They're going to go for them. And as I've said before, people like me and people like Chris, we're not happy about it. We're going to do the best we can. And we know there are ways that you can protect your money in ways that other people are simply not going to show you.
You know, you'll get that information from the guide.
If you're a business owner, definitely go and check out Chris's book. It's an excellent read. So thanks again to Chris and thanks, Kevin. We'll be back same time, same place next week.
will and until then my friend see ya
Speaker 2 (58:55.352)
We hope you enjoy today's episode. Don't forget that we are constantly updating our resources inside the WealthBuilders membership site to help you create, build and protect your wealth. Head over to wealthbuilders.co.uk slash membership right now for free access. That's wealthbuilders.co.uk slash membership.