The ‘art of the possible’
By Chris Griffiths, New Investments Fund Manager
It still surprises me when I hear of capable management teams
who don’t take up the opportunity to buy the business they’re
working for when its owner decides to sell up and move on.
Many of these teams know the business inside out and they also have
firm views on how they’d take it forward.
Selling a business to its existing management
team is often an attractive option for the business owner, so why
aren’t more management teams taking the plunge? While a lack
of confidence could be one reason, I wonder how many management
teams are put off because they think they can’t afford to buy the
What are your potential funding
In my experience this is quite a common
misconception and as a fund manager at Finance Wales, thinking
about the ‘art of the possible’ is something I do a lot -
especially when it comes to helping ambitious and capable managers
secure the funding to buy a business.
Banks or investors like Finance Wales can
often come up with the lion’s share of the finance needed, leaving
the management team to cover a relatively small portion of the
funding they require.
If the management team are still left with a
funding gap, it’s not the end of the story. There are still a
number options worth considering:
Leveraging fixed assets
Raising finance against fixed assets can be an
effective way to secure additional funding. Stock that’s easy to
sell will always be attractive to asset-based lenders and plant and
machinery is also an option, especially if it is bespoke or has
recently been upgraded.
Leveraging a business’ debtor
Some banks and specialist funders will provide
funds against current and future invoices. While this can be
a useful way of unlocking finance, it’s worth taking a longer-term
view as you could be left with little headroom should revenues dip
once you’ve taken over.
Property costs invariably bump up the price of
a business, but if they’re taken out of the equation, you can
reduce the price. Leasing back premises will not only make
the deal easier to fund, but it will also leave the current owner
with a monthly income.
Focus on the ‘art of the
So with an open mind, positive attitude and a
clear focus on the ‘art of the possible’, could 2016 be the year
you achieve your goal of owning and running your own business?
Finance Wales can support a full range of
business succession options. To find out more about how we can
help contact us.