Whether you’ve been running your business for two years or two decades, you might be considering selling it at some point in the future. There’s no one-size-fits-all “right time” to do so, but it’s best to start preparing your business for sale as early as possible. When the time comes, your business will be a valuable prospect to potential buyers and the sale will go more smoothly.
Identify who’s best placed to help you through the process.
First things first, selling a business is a complex process involving legal and financial intricacies.
Rushing into it could incur avoidable fees or fail to achieve an accurate price, so always seek advice from professionals experienced in business sales. Look for specialist accountants and solicitors, even if they’re pricier than their regular counterparts.
We recommend starting the conversation as early as possible to give you the very best chance of securing the maximum business value. Give yourself ample time for everything; excluding all of the preparation beforehand, the actual sale itself can take over six months to complete.
Document your profit trends.
One of the main things a buyer will look for is proof your business is profitable. They want a clear expectation of their return on investment, so they can decide whether it’s more viable to purchase your business or invest their money elsewhere.
If you’re thinking of selling your business in five years, focus on increasing sales and reducing costs now. Spend the next few years documenting a strong growth pattern. To increase value, consider telling the buyer about any opportunities and strong growth potential you’ve identified within the business.
Similarly, we encourage you to disclose and document everything to the buyer in order to limit any potential liability. This will make it harder for them to have any future recompense in relation to these areas.
Review your business structure.
The correct structure gives buyers confidence and demonstrates that the business will continue to run smoothly after purchase.
There are three ways to achieve this:
1.Document your knowledge.
You know your company’s processes and procedures like the back of your hand, but how much of that knowledge is stored in your head? To make sure the business isn’t reliant on you, document everything in a way that’s easy for others to pick up.
You can also take advantage of technology to handle certain tasks you’ve been responsible for. Streamlined systems that automatically take care of company processes will make your business a more attractive, valuable prospect to buyers.
3.Build a strong management team.
For certain businesses, having a credible management team will increase the value. It makes it far easier for the buyer to hit the ground running once the purchase is complete.
Know your finances.
Anyone serious about purchasing your business will ask about the numbers, so ensure your financials are well-documented and updated.
The buyer will ask for copies of:
- Up-to-date management accounts.
- The previous year-end accounts.
- Possibly, the year-end accounts from the four preceding years.
If you provide these documents as early as possible, it can reduce the risk of price adjustments from the buyer down the line.
Put yourself in your buyers’ shoes.
You’ve probably been involved with your business for several years, so try to take a step back and think about it from an outsider’s perspective. Ask yourself:
- What questions would a buyer have?
- Are there any aspects of your business that require further explanation?
- Have you made it clear where you can make improvements to increase profitability?
Prepare for buyers to carry out due diligence.
These are checks to find out the intricate details of your business and identify any problems, like potential HMRC liabilities. The buyer is making sure there won’t be any unexpected surprises after purchase.
When the buyer asks a lot of questions, business owners can find it quite intense. Some buyers will focus on certain areas, while others will want to look at everything. They’ll hold a magnifying glass up to your finances, contracts, staff, and contractors. Having clear, well-ordered documentation to hand will help you here, ready to provide answers to their questions.
It’s essential to work with a specialist accountant at this stage. They will help with the provision of information to the buyer as they carry out these checks, as well as reviewing your tax position so you know how much money you’ll receive at the end of the sale.
Solicitors will also need to be involved, drawing up the head of terms, looking at contracts and organising the sale purchase agreement. Legals are costly but necessary, so your accountant plays an important role here as well. They will help you navigate the legal costs involved and work out how it impacts the end figure.
Remember your personal goals.
Selling your company is, of course, a business decision – but it’s also deeply personal. Ultimately, it’s a decision only you can make. Throughout the process, keep in mind your own objectives: do you want to sell your business to enjoy the financial benefits? Is it so you’re able to retire and enjoy more free time?
Keep these personal objectives in mind when considering offers from buyers. If the main motivating factor of selling is to have more time to spend with loved ones, you might be willing to accept a lower offer if it achieves that goal.
Check in with yourself throughout.
You may find selling your business isn’t the only way to achieve your personal goals. If you were to bring in a managing partner to help you run the day-to-day, it could free up some of your time without having to say goodbye to the business and its profits.
Ultimately, selling a business is an intense process involving a lot of questions and back-and-forth. If you eventually decide not to sell, it’s not a bad thing. The preparation you’ve done will have moved your business forward.
Stay focused on the end goal, check in with yourself regularly to ensure it’s what you really want, and lean on the experts as you go through the process.
Navigate the sale with confidence, from start to finish.
Our team of experts at Saint have helped hundreds of business owners sell their companies. We’ll be by your side throughout the process, providing financial guidance, advising how to increase value and helping you achieve the best sale price. Fill in our quick form to get started.