It’s always a good idea to plan your business sale well before you may wish to start the process. However, for everything to run smoothly, you’ll need to know what you need to keep in mind, so here is a list of considerations.
Why Do You Want To Sell?
You need to ensure you’ve got a good reason for selling your business – a reason that any prospective buyer can understand. It’ll also help you structure an advantageous transaction. Some of the most common reasons for selling a business include:
- Poor health
- Matrimonial settlement
- Trading difficulties
- Unsolicited approaches
- Partner/Director disagreements
- Positive tax circumstances
- Direction changes
- Another business interest
- The business has expanded beyond your level of management experience
What Type Of Sale Delivers Optimal Value?
There are different types of sale including Share, asset and goodwill transfers, management buy outs, listings, and trade sales.
You’ll need to be aware of the taxation consequences of your sale. Some tax considerations include:
- Taper relief
- Roll over relief
- Capital Gains
- EIS or VCT
The Handover Process
Is there a management team in place who can handle things when you’re no longer there? If not, it’s important to consider which handover type and the length of handover that you’re going to give.
Do you have realistic price expectations? An educated buy will be intelligent and will consider only a reasonably priced business.
Usually, buyers are keen to defer part of the consideration and they could be suspicious should you refuse to consider at least some element of deferring payment since this suggests you have low confidence in the business. It could even imply you have a hidden agenda. Nevertheless, every deal is unique, and its structure will depend on your individual circumstances.
What Does A Buyer Look For?
Of course, all buyers have their own considerations and requirements, but there are some ways in which you can appeal to the average purchaser. For example, have the right management information ready to supply straight away will show you’re efficient and organised. A buyer might lose their interest if you don’t have key information to hand. Buyers and their advisers are likely to raise certain issues to understand the business better. These issues include:
- Three years of accounts and monthly management accounts
- A business plan
- Information about the company and shareholdings
- Company brochures and literature
- An asset inventory
- Information about staff including their job titles, service lengths, ages, and salaries
- Reasons for selling
- Profit record
- Good management control
- Strong margins
- Ongoing management
- Strong cashflow
- Updated agreements and contracts
- A good customer spread
- Growth potential
- Market position
- A robust brand identity
- A well-maintained, tidy appearance
- Price expectations
Buyers Don’t Like Surprises There’s one key thing to remember when selling a business – buyers don’t like surprises, especially unwelcome ones. Bear in mind that the majority of adverse situations like tax arrears, outstanding loans, lease or landlord problems, health and safety problems, staff issues, or unfavourable leases on equipment can all be overcome as long as they’re disclosed.