How to prepare your business for uncertain times

Marc Fecher, partner at Kingston Smith Corporate Finance outlines the best measures to stay stable during volatile conditions.

With so many possible outcomes, business owners are wondering how Brexit could affect their businesses and whether now is a good time to consider selling.

Before making a decision to sell a business there are number of issues to consider. The first step is to understand the stability of your business  – does it have the  liquidity necessary to weather the uncertainty? What is your exposure to exchange rate volatility?

The second step is to focus on identifying future business opportunities and long term prospects given the economic cycle.

Here are a few items to consider.

Prepare a robust business plan that includes succession and addresses your strategic options

Our research shows that only 30 per cent of business owners have written exit plans – that implies a majority have not properly considered it.  There are many reasons why business owners do not formalise a plan for themselves and their business which may include fear of retirement, reluctance to release control or deal with family issues. Running a successful business is a full time job, but this often leaves business owners with tunnel vision and unable to plot longer term objectives particularity at times of economic uncertainty.

Consider the adequacy of your cash flow and access to capital

Do you have a system that monitors your cash position, allowing you to manage your cash in a disciplined way, helping to reduce or postpone spending and that focuses on cash inflow? In addition to monitoring your cash position daily, you need to understand what your cash position is likely to be in the mid and long term. When business is cash rich in good times, it often lacks the discipline to quickly resort to best cash management practices when cash is more limited.

Assess your investment programme

You need to understand which parts of your business are profitable and which are not. This might be a good opportunity to analyse and consider disposing of unproductive assets and potentially divesting yourself of non-core activities or division that are suppressing the overall profitability. This may make your business more efficient and enhance its value as well as possibly unlock more cash for your business.

Maximise the value of your company

If your business has solid financial fundamentals and a strong balance sheet with low debt levels, investors are more likely to view you as a stable investment with lower perceived risk no matter what the prevailing economic conditions. Reviewing and restructuring your balance sheet may put you in a position to seek attractive merger or acquisition opportunities supported by a wider number of sources of funding.

Monitor the market

You may be operating in an industry that is not as affected by the economic cycle and uncertainty surrounding Brexit. If you are exporting or your supply chain spans more than one country, you may need to understand what the potential changes could be and ensure you have a system in place that monitors current fast moving economic developments. Additionally, you can begin to appraise your competitors and identify their vulnerabilities –  there could be opportunities to consolidate your industry which you may want to initiate. Volatility always brings opportunity.

There are a number of activities you could implement, depending on the size of your business, the industry you are working in that will help you create and fine tune your future personal and business plans.

Marc Fecher is a partner at Kingston Smith Corporate Finance.

Kingston Smith Corporate Finance advises on the sale of Lexington Catering Limited to Elior

Founded in 2002, Lexington has grown to revenue of more than £30 million. Its 650 employees provide catering services to prestigious City clients such as the London Business School, the Royal Bank of Canada, Savills and Rothschild.

Tim West, Chairman of Lexington commented “Marc and Matt have started working with us soon after we started our business; providing advice and ultimately preparing our business for sale as well as supporting us all the way through the sales process. Kingston Smith has been instrumental in ensuring that we exited at the desired value in our preferred timeframe. They also ensured that the buyer fully understood the value of our business from the outset and provided strategic advice throughout the process. We were confident that the Corporate Finance team had our best interest in mind due to the longstanding relationship we developed.”

Marc Fecher, Partner at Kingston Smith, noted “We are delighted that we could support the Lexington Catering team in this strategic and exciting transaction. We have been advising Tim and Mike for many years and are very familiar with their business. We are thrilled that Lexington will continue to thrive under the new ownership.”

Founded in 1991, Elior Group is one of the world’s leading operators in the contracted food and support services industry; generating revenue of €5,016.9 million in FY 2012-2013 through 17,500 restaurants and points of sale in 13 countries.

Praseeda Nair

Praseeda Nair

Praseeda was Editor for from 2016 to 2018.

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