There can be all sorts of reasons why you might decide the time’s right to sell your business. The last thing you want is to go through the process and end up wondering whether you could have got a better deal. Here are the main points to be aware of.
Your best option is to take professional advice as early as possible – ideally 12 months or more before the intended sale. This will allow time to make preparations and present your business in the most favourable light.
What Are You Selling?
This might seem like an odd question but it’s hugely significant. If your business isn’t incorporated you will probably just be selling assets and stock. If you’re incorporated you could be selling shares, assets (tangible and intangible) or a mix.
Intangible assets include your brand (which may have a value beyond the ‘book’ value of the business) and intellectual property, which could include trademarks, designs, images or patents. Decide if there’s anything you want to keep control of after the sale.
Who Do You Want To Sell To?
There may be ‘natural’ potential buyers such as competitors, suppliers or businesses looking to enter your market. Other options include passing the business on to a family member or a management/employee buy-out. Your personal circumstances will probably decide which option suits you best.
What Advice Do You Need?
Tax planning is likely to be near the top of your list. Getting this right often makes the biggest difference to the financial outcome. You’ll also need advice on:
- Preparing your business for sale to make it as attractive as possible.
- Contracts – make sure that agreements with customers and suppliers are as watertight as possible.
- Drafting the sales memorandum that will be sent to potential buyers.
- Confidentiality agreements with potential buyers.
- Payment terms and agreements, such as how much will be paid up-front in cash, how much is deferred and under what terms.
- Due diligence – how to answer questions from potential buyers and their agents.
- Any warranties and indemnities that might affect your future interests.
Selling Your Business – The Process
- Clarify why and when you want to sell.
- Sound out potential buyers.
- Develop a financial plan to maximise the value of your business to a potential buyer.
- Prepare and send out a memorandum of sale with a request for opening offers.
- Shortlist your potential buyers and ensure they have the financial means to proceed.
- Clarify payment terms e.g. cash, deferred payments, share swaps etc. Make sure you retain some measure of control if payments are linked to future performance.
- Prepare for due diligence (financial and legal).
- Complete the sale.
Even from the point where you identify a preferred buyer the process can take several months. The better prepared you are the more efficient and painless this process will be.
If you are thinking about selling your business sometime in the next few years it’s a good idea to get professional advice now. Contact us on 01934 623 501 or email email@example.com.