Buying out the boss – the benefits of a management buyout

Posted on 15 Jun, 2012

A management buyout can be a fast way to put yourself at the helm of a commercial organisation, without all the hassles of starting from scratch.

It can also be an ideal solution for an existing business owner who wants to sell their firm in order to retire, or simply to move on. The costs, in both time and money, in selling their business to an existing member of the team should be much less than looking for and securing an external buyer.

The advantage to you of buying from your boss is that you already know the business. You’ll have a good knowledge of existing customers, suppliers and staff. You’ll also have an eye on the strengths you want to build on and the weaknesses that need to be addressed.

Arranging a management buyout

Always take professional advice before committing to buy a business. It doesn’t matter how well you think you know the business you’re planning to purchase, or how good your relationship with the owner is. Obtaining an expert opinion from an independent third party is likely to raise issues you had not considered, and which ought to be resolved, before entering into what is likely to be a major financial commitment.

The experts can also advise on the most appropriate method of purchasing the business, and the challenges you could run into after taking control. You should not assume business will simply carry on as usual, particularly if the current owner has significant input on a day-to-day basis right up until they leave.

Financing a management buyout

Again, professional advice is important here. It’s unlikely that you will have the cash to make the purchase outright, in which case you’ll need some form of credit.

You’ll also want to secure the cash flow of the business by injecting working capital. If you’re looking to bring in change, this will demand even more cash. Reinvigorating a business costs money and going for growth demands investment.

We have helped many business owners find a cost-effective solution to the cash flow challenges they faced after a buyout. Using invoice finance to release cash that’s otherwise locked up in the sale ledger has helped them pursue their ambitions for their new firm.

If you want to know more about what invoice finance could do for your business cash flow, our expert team would be pleased to speak to you – call us now on 0845 388 9725.