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Chris Budd: Business owners need to start stepping back

Chris Budd
Budd: ‘Make time to work on planning’

Almost exactly two years ago, I attended a regional meeting of the Employee Ownership Association. It was a day that genuinely changed my life.

I’d been looking for an exit route for my business, Ovation Finance, for some time, and had been working to make myself the least important person in the business for several years. I was by no means desperate to sell, but wanted options for the future.

At that EOA meeting I met owners who had sold to or were considering an Employee Ownership Trust (EOT). I also met employees of EOT owned companies. The positivity and energy in the room was inspiring, and I knew I had found my exit.

Nine months later we completed the deal. In hindsight, this timescale was too short, and I should have taken much longer in preparing the business for employee ownership.

Armed with this new understanding, and the experience of having gone through the process myself, I wrote a book called The Eternal Business. I then began a new career promoting the concept of the EOT, both generally, and specifically to IFA owners.

Platform company Nucleus has recently released the latest census of advisers who use their platform. It makes interesting reading over a wide range of areas. For example, it reveals a progressive trend of investment in youth, with some 60 per cent of firms employing between one and four people under the age of 30.

I particularly enjoyed hearing 16 per cent of firms said they are considering using the EOT as their exit route. Last year the question was not even asked.

Intentions in to action

There are many changes required for a founder to go from being central to a business to being able to exit. My experience suggests that it takes at least two years before an owner will feel ready to step aside, often much longer.

The interest in my Eternal Business Consultancy and online programme has been enormous, and I have over 60 companies currently considering this route. The majority of them are IFAs. So far, however, those moving from intention to taking action has been much lower.

The reasons for the delay have been numerous, but they are often due to the owners being too busy running their business.

To give an example, one firm commented that they need to sort out issues within the firm around the reliance upon the founder before they start dealing with succession planning issues. Yet this almost perfectly describes what succession planning actually entails!

Options

The danger in not dealing with the issues early can be that an owner will find themselves at the point of needing to sell the business, but without having prepared. And this means options may be limited and valuations reduced.

The great news about the Nucleus survey is the number of companies now seeing the EOT as their potential exit vehicle. The next challenge is to get more owners to start taking the steps towards it!

Chris Budd is former managing director of financial planning firm Ovation Finance and founder of The Eternal Business Consultancy

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