Gez McGuire, serial entrepreneur and investor, discusses SME mergers and acquisitions, how to purchase a distressed business, growing through acquisition and sourcing alternative finance.
Business Connections Live interview at the Festival of Enterprise
Why it’s never too early to begin preparing your business for sale
For the vast majority of us, starting a business is all about gaining more freedom and autonomy in our lives. While in the initial stages the focus is on managing the transition from employment or education into business ownership and developing a steady stream of clients or customers it’s never too early to consider how you are building value into your business. What may initially have been best categorised as a lifestyle business can quickly take on a value of its own, becoming an attractive investment proposition if the right steps are taken.
Why entrepreneurs are best suited to Acquisition Led Growth
While many people treat the phrases small business owner and entrepreneur as interchangeable the difference in mindset means the latter is a lot more suited to growth through acquisition writes serial entrepreneur and investor Gez McGuire.
Just Entrepreneurs January 2020
How to Package your business for sale
Gez McGuire is a serial entrepreneur and investor. He works with businesses throughout the UK to facilitate purchases. Gez owns a successful digital advertising business, which he has committed to growing through acquisition and is looking to partner with likeminded owners in the marketing and advertising sector.
“Selling up can be one of the most testing times for business leaders. Handled correctly it can lead to a life-changing sum of money and the freedom to explore new ambitions and aspirations. Handled incorrectly, it can sap the drive of the owner and the business can be left wilting on the vine losing value.
“Understanding how a deal will be structured and what an investor will be looking for is one of the key differentiators between businesses that sell and those that don’t.”
Achieving ambitions through acquisitions
Acquisitions are one of the fastest routes to growth for SMEs and are often seen as a rewarding investment in time and money for those approaching retirement age looking for a profitable way to pass on their skills and experience. Serial entrepreneur and investor Gez McGuire addresses some of the most common misconceptions and discusses the key steps to acquiring a business.
“Whether you’re an aspiring ‘olderpreneur’ seeking a new challenge, or an SME looking to grow, a carefully considered acquisition can often provide the answer. So, what are the key steps businesses and individuals must take when looking to make a purchase?
“The crux of this is that it’s about having a growth mindset rather than a large amount of money in the bank. Often purchases can be made without the buyer putting their hand in their own pocket, with finance based on the future revenue of the business. As an owner myself, I see acquisitions as the quickest, safest and most guaranteed way of growing, because one purchase could treble, or quadruple the size of my business.”
Gez McGuire, SME Magazine Winter 2019/20
Gez McGuire is an entrepreneur and investor. He works with businesses throughout the UK to facilitate purchases and has committed to growing his own business through acquisitions.
“Invoice finance and factoring will remain popular thanks to its simplicity. However, this should only really be considered by businesses that struggle to get paid on time or have long payment cycles and are looking to improve cash flow” says Midlands investor Gez McGuire. “If the reasons for trying to put factoring in place is that there is concern as to whether the business will get paid at all, the finance company may reject the proposal or take a huge percent as insurance.
“Grants are a common route for many small and medium sized businesses. Grant bidding however cannot be taken lightly. Finding and submitting to grant applications takes both time and money and is a fulltime job in and of itself. Businesses reliant solely on this form of finance can often find that requirements can change from year to year resulting in disastrous consequences. With the UK leaving the EU the number of grant opportunities is also set to diminish significantly. The most sure-fire way organisations can protect themselves is to diversify their funding options.
“Equity finance is a good option for most well-run businesses. Trading the company’s stock for finance is often seen as a high-risk strategy for the investor, but very low risk for the lender. The crux of being able to access this form of lending, however, often comes down to having access to investors and being able to demonstrate that the business is well formed and well-managed with room to grow. One of the best ways of increasing the chances of securing equity finance is to commission a professional forecast which will add credibility, provide external validation, attract investors and provide reassurance.”
Gez McGuire, Midlands Business Insider October November edition
Why more SMES should be planning acquisitions as a route to growth
Major mergers and acquisitions are often in the news, but you don’t have to be turning over ten figures to purchase another business writes serial entrepreneur and investor Gez McGuire.
“One of the strongest arguments for placing acquisitions at the heart of your business strategy is the ability to achieve rapid growth and personal gain in a way that would be impossible through day to day activity alone. For many, the right purchase could mean tripling or quadrupling the size of their business overnight.
“Yet ask any small and medium sized business owners if they have an acquisition plan in place and the answer, more often than not, will be no. Not knowing how to approach a purchase is often one of the biggest obstacles.
“So, what are the key steps businesses and individuals must take when looking to make a purchase?”
Deals: Selling your business: Preparing to sell
The biggest mistake a business owner can make is to get an unrealistic valuation early on, says Midlands investor Gez McGuire.
“Nine in ten businesses advertised for sale will never sell due to overvaluation.
“In part, this is due to a brokerage system that favours high valuations as a means of securing business and maintaining healthy percentages, over ensuring successful completions. With a single sale netting the chosen broker tens or even hundreds of thousands of pounds in commission they can go high, in the knowledge that even if only one in ten completes they will still see a healthy return.
“Understanding how a potential buyer will value your business and how a deal is likely to be structured can help ensure a successful sale. This means taking into account creditors, assets and revenue over a fixed period to identify the business’s true value. It’s worth also noting that most sales will not take place as part of a single transaction. Often a deal will be structured to give the owner a closing payment followed by deferred payments over three to four years.
“With a realistic value and willingness to accept a structured payment, business owners can buck the trend and realise a sale under the best possible terms.”
Gez McGuire, Midlands Business Insider August edition
Trading up: Why smaller businesses should consider buying their larger competitors
“Ask any small and medium sized business owner if they have an acquisition plan in place and the answer, more often than not, will be no.
“The UK is an SME driven economy, with 99 per cent of all businesses having 250 employees or less. A large proportion of those organisations, particularly those at the medium level with earnings of seven figures and above, are led by individuals in their 60s, 70s and in some cases 80s who will have their eye on succession planning. At the same time, there has never been more funding options available, with new forms of lending allowing purchases that would have proven difficult to get through to completion.”
Major mergers and takeovers are often in the news, but you don’t have to be turning over ten figures to purchase another business writes Midlands investor Gez McGuire.
“With the right aspiration levels and self-belief we could find that the Sorrells and Sugars of our generation won’t be tracing their roots back to the East End of London, but the streets of Birmingham, Leicester and the wider Midlands.”
The best way to grow your small business is to buy another company
With a small amount of effort, you could triple or quadruple the size of your business, writes Gez McGuire
“I’ve identified a perfect storm of readily available capital and businesses ripe for sale.
“Latest figures reveal that there are more than 113,000 directors over retirement age still running businesses. For business owners such as myself in their 30s, 40s and 50s, this presents a huge opportunity to grow, if only we can grasp it. For many, knowing where to start if you want to buy another company seems the biggest obstacle.”