Do You Own a Business or a Job? The Reality of Selling Your Inflatable Hire Company
I've touched on this topic before, but it’s worth diving into again because it's so critical for those in the inflatable hire business. The fundamental question you need to ask yourself is: Do you really own a business, or do you just own a job?
Understanding the Difference
If you own a job, it's almost impossible to sell. An inflatable business that relies entirely on you is not a business in the true sense; it’s more of a self-employment situation. This distinction is crucial when considering the future and potential sale of your business.
For those who own a job rather than an inflatable business, the quickest exit strategy is usually to sell off the assets. This approach can reduce ongoing costs like wages and storage fees. Unfortunately, many inflatable business owners don't have a solid exit strategy because they focus on the immediate cash flow rather than long-term planning and sadly is the most chosen option. I can count on one hand the number of businesses that have exchanged hands as a going concern through the formal sale of Ltd Co structure.
It's common for small businesses to lack redundancy plans for owner/operator illnesses or staff loss, which can lead to collapse or closure. This situation is a real shame because it highlights the fragility of a business that isn't structured to operate independently of its owner.A properly structured inflatable business can take up to three years to sell, which is often too long for the seller due to the reasons mentioned above.
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If your inflatable business can’t operate without you for an extended period, then selling it for a profit becomes incredibly challenging.A key indicator of a real business is how long it can operate without your direct involvement. If you can take a two-week holiday tomorrow without any disruption to the business, then you truly own an inflatable business. Conversely, if your absence would cause the business to collapse, then you likely own a job.
The key indicator is how long can you be missing from the business? If you can go away on Holiday for 2 weeks tomorrow unannounced and all work and jobs get done then you own a business.
Selling my inflatable hire business
My inflatable hire business was acquired in 2021 for a total of £440,000 before recovery from COVID-19. It was massively under priced, but I've seen many companies hold on for dear life to no avail. The sale for me was about investing the funds into other projects, and the opportunity cost was huge. The sale funds have now been invested into more hands of projects offering a similar return.
The asset value was circa £150,000, and the rest was for goodwill.
The deal was financed by the buyer, with the company debt repayment making only around 12% of the company's turnover, giving massive scope and profits for all involved, however the business was operated on a fully staffed basis where I popped in for 5-8hrs a week through choice and has staff in place for everything and still generated a large surplus around 20% ROCE then its salable.
The deal was structured through applying for the HMRC disposal of lifetime assets and I only incurred a one-off 10% tax charge on the sale of a going concern, making the return even more appealing. The company was snapped up within six weeks, and the new owner is thriving.
This was only possible due to the VAT registered, Ltd company, Fully staffed and managed structure.
The new owner got a great deal because the inflatable business was generating consistent revenue and had a reliable team in place. This situation ensured that everyone involved was happy and profited from the transaction. The current owner got off to a rocky start but we worked together the returns are up way more than when I owned it and continue to grow from strength to strength.
Nothing wrong with owning a job.
In addition to the above, there's absolutely nothing wrong with owning a job or something in between as long as you are clear about what you wish to achieve in the long term and understand the market you operate in and the costs associated with your replacement.
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Take Betterbounce for example. Betterbounce is run by myself and my partner Samantha. We go to work most days and work as hard as we can. We have minimum staff to help us run the inflatable business so fall into the hybrid job owner category. I run the CAD/ CAM design, 3D design, Graphic design, manufacture, Documentation drafting, staff manufacture training in all of our worldwide factories and Samantha manages the office, admin, UK manufacture, testing and is a qualified Bookkeeper/ accountant and everything in between. The building is owned by our property company and has no rent to pay.
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Should we wish to restructure the company to be a salable asset, there would be a huge skilled wage expense that we're well aware of that would require a company growth of around 25% to allow for. There are also very few buyers available in the market with sufficient reserves to buy the company.
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Combining this with the fact our children are only 14 & 15 and we are bound by school term times and daily hours, we see little point in making any changes for the next 4 or 5 years and as such, choose to continue enjoying being owner/ operators for the foreseeable future and only make the push to salable asset a few years before we are ready for retirement when the kids reach 21 and are stable.
Conclusion
Selling an inflatable hire business is possible, but it requires forethought and proper structuring from very early on. I always knew I wasn't going to fall into the selling-off assets trap and made dam sure I started away from such an ending on day one by looking at the bigger picture, vowing never to own a job.
If you wish to do this yourself, you need to make sure your business can run independently of you, build redundancy into your operations, and have a long-term exit strategy.
With these elements in place, you’ll not only have a successful inflatable business but also a valuable asset that others will want to buy.
Above anything else, being happy in your choice like we are at Betterbounce is more important than anything and we wish you all the best.
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