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Planning for Business Succession

Topic : Planning for Business Succession
Author : Simon Bruce - Virbix

Issue:

A business owner, Trevor, knew that he wanted to exit his business within three years. The business he owned and operated was a retailer of work wear, with a turnover of just over £1million, employing six people and making a small operating profit.

Trevor recognized that the work wear business was becoming increasingly competitive and that larger customers were starting to look upon the trade as a commodity purchase. That meant that they used their purchasing muscle to force prices down. Any supply contracts with such customers resulted in a lot of management time, high working capital and miserable margins. In other words, a lot of work for little reward.

It became apparent when talking to Trevor that he had seen an opportunity in positioning his business to sell more specialist, safety related clothing. Customers for this type of clothing needed to make their purchases to meet health and safety regulations so they could work on places such as oil rigs, chemical plants, or to use dangerous equipment like chain saws.

Resolution:

After undertaking some market research to confirm Trevor’s theory, a repositioning of the business was recommended which involved changes to the website, improvements in the supply chain, and in customer care and contact. Alongside that came a change in the online marketing and the range of stock available for sale.

These changes meant that over a few years the business became a niche supplier of high value, high margin products rather than a small player chasing low margin business.

Impact:

Through these changes Trevor was able to differentiate his business from his competitors, to develop a strong customer base and a reliable supply chain. Whilst his turnover did not grow initially his margins and bottom line did, and so did the value of his business.

He was then able to appoint some-one to take over the day to day running of the business, whilst he spent more time sailing and planning its eventual sale at a time and price to suit him.

 

Author and Financeheads Member
Simon Bruce Virbix
Tel: 07785 908120 e-mail: simon@virbix.co.uk


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