How Do You Go About Selling A Business?

Selling a business is not just an art, but down to hard work, and key planning.

IF you are planning to leave, or sell your business, this page tells you what important facts and strategy, you should have in place, before the event.

Why You Need Exit Planning

It may come as a shock to you (or it may be a relief), some day your business will be sold or transferred, and you will no longer own it.

Do you want to be in control of that process?

The business is probably the owner's most valuable asset

Financial security depends on converting that asset into cash.

Sometimes the sale of a business may be forced upon an owner, such as the death of a Partner or co-owner, divorce, realisation that the competition is winning, pressure from the family or deterioration in health.

In a nutshell, the very essence of Exit Planning is to facilitate leaving a business on one's own terms.

SHOULD YOU BE THINKING of selling a business, it is vital that you “look before you leap” and review your business and personal situation before making a final decision.

Think About These !

From a legal point of view, make sure that your Solicitors are capable of handling your business sale competently; that they have the capability of working to agreed timescales and within an agreed budget.

There are both advantages and disadvantages with a “Share Sale” or an “Asset Sale” (including tax issues) so make sure you know which one is appropriate for you.

Other legal issues such as potential environmental or health & safety problems need to be resolved as they could well be picked up in the purchaser’s “due diligence” exercise, which if not resolved, will only prolong the sale, reduce the offer price or cause a collapse of the deal altogether.

Changes to the tax rules always seem to be a constant reality so it is vital to ensure that the deal is structured tax efficiently by taking specialist advice. Capital Gains Tax, Taper Relief (UK),and the setting up of Trust Funds are always under review, so it is important to check out the trends and cross-check with your advisers, before deciding which route to follow.

An accountancy review of the business is equally important. The value of the business can be maximised if the accounts show steady and sustainable profits and growth.

Businesses likely to lose money in the year of a sale are not easy to sell, particularly as an initial offer can be reduced or totally withdrawn if unexpected trading losses are found.

Potential purchasers will need to see not only copies of the Statutory Accounts but will want to see up-to-date Management Accounts, fixed assets registers etc so make sure any accountancy problems are resolved well in advance.

If you are selling a business in order to retire, then it makes sense to discuss this with your pension adviser before the deal is structured. As with tax, pension rules change and decisions to be made may often depend on your own personal situation.

Common Pitfalls For Business Owners Selling A Business

1. Assuming their business will be sold easily.

2. Failing to take personal goals into account when planning an exit.

3. Failing to take into consideration how an investor or purchaser will receive an adequate return on their investment.

4. Completely ignoring an Exit Plan within their Business Plan or having no Exit Plan whatsoever.

Do Not Exit Plan By Crisis!

As the most obvious place to have an Exit Plan or Exit Strategy is within a business plan (the need for direction, objective), it follows that the vast majority of business owners have no formal plan in place to help them determine these obvious and ultimate business goals.

Take advice prior to selling a business and ‘look before you leap’.

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