What you need to know before selling your business￼
Selling your business may be the time when you finally get to reap the rewards of a lifetime of work. Or it might be the opportunity to cash in when the conditions are right, before you start your next enterprise. Either way, the sale of your business will be one of the most important things you'll ever do. You only get to do it once, and if you get it right, the financial gains can be considerable.
Here are some of the most important issues you will have to consider:
Timing the sale
When is the right time to sell? In an ideal world, you would sell when the market is booming and before any anticipated downturn, but internal factors are just as important. If your business is performing well, perhaps at the peak of a pricing cycle, it will be more attractive to potential buyers.
Above all, if you have any choice in the matter, sell when you want to, not when you have to.
Preparing your business for sale
You will need to have up to date information available for inspection by potential buyers. This will include business plans and budgets, as well as financial documents such as profit and loss statements, tax returns, loans against the business and the lease.
There are a number of things you can do in order to make your business more attractive to potential buyers and therefore command the best possible price. These might include:
- Increasing sales figures - perhaps through stronger advertising or offering special deals
- Improving your assets - you might want to sell off any unproductive assets and replace any machinery reaching the end of its useful life.
- Reducing liabilities - if you can clear up any pending legal disputes or other liabilities before the sale, there will potentially be fewer obstacles to put a buyer off
- Formalising contracts - put into writing any deals you have with suppliers, and contracts with employees
- Smartening up - make an effort to improve the appearance of everything in the business, from the premises to the paperwork.
Valuing your business
Overvaluing the business will discourage buyers. A good way to ensure a high price is to create competition between potential buyers. You can reject any bids that fail to reach your estimated value, obliging other bidders to increase their offers.
Making the sale
Before selling, you should consult your accountants as well as your solicitor and independent financial advisor. In many cases, sellers find it necessary to finance at least some of the price - that is, lending to the buyer to facilitate the purchase.
After the Sale
Once you know the value of the business you need to determine how the funds released by the sale can best be used to provide you with a comfortable retirement or to begin a new business venture. Valuable tax reliefs are at stake here, so consult us early in your planning to avoid an unnecessary tax bill.
With proper planning and good advice, you can ensure that you get the price and terms that satisfy your reasons for selling your business. We can help you make the right decisions.
If you are looking for professional advice on business exit planning, including selling a business, get in touch with your Swindells’ partner who will be able to advise you further.
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