When placing a business for sale it’s good practice to assess whether any everyday issues or challenges could diminish its value and compromise the chances of achieving your objectives.
Outdated IT or administration systems, lack of staff training, and relationships that could be better with suppliers, can all reduce the final value achieved in a sale, and negatively affect your financial future.
Advanced planning could take several years – some business owners include an exit strategy in their initial business plan - but paying attention to areas that face scrutiny by potential purchasers does help you achieve the best price possible.
When your business does not fit neatly into a particular industry or sector, securing the services of professional business sales brokers with the broadest experience is also an important consideration for success.
As we mentioned earlier, some business owners formulate an exit strategy when they start their business. Included in the original business plan, it provides a ‘road map’ for running the business and becomes an ‘ideal’ ending to aim for. If you haven’t yet developed such a strategy our expert team will take time to understand your aims and goals, and help you formulate a plan.
One of the most common reasons for selling a business is approaching retirement. If this is the reason why you’re selling, achieving your financial goals may be the most important aspect. Ill health is also often a factor when deciding to place a business for sale, as is a declining market, or simply wanting to move on to a new venture.
You’ll need professional legal and accounting assistance during the selling process. Potential buyers will want to view your accounting records and financial documentation including insurance policies and asset registers. Legal assistance will also be required for the various documents that must be produced during a business sale.
Valuing a business requires a deep understanding of the industry in which it operates, as well as practical experience of selling businesses in general. It’s a complex process, and you’ll need to take into account any intellectual property such as trademarks and copyrights, in addition to the goodwill you’ve built up over the years.
The business sale may be structured in such a way that you stay on for a pre-agreed time after the sale. This could be on a consultancy basis only, and involve an initial payment from the buyer, followed by instalments over the time you remain. This type of ‘earn out’ arrangement offers a longer handover time for the new owner – it can ease the process in general, and reassure customers that a high level of service will continue.
Having considered some of the common aspects of selling a business, what are the practical steps involved?
The information memorandum contains details about your business, and is the first official document produced for the sale. Its contents vary depending on the type of business you run, but will typically detail your products/services, the market you serve, number of staff, a short history of the business, and the reasons you’re selling.
In any business sale there’s a risk that sensitive business information could fall into the hands of competitors if it isn’t protected prior to negotiations. A comprehensive non-disclosure agreement should be signed by any interested parties before the information memorandum is released.
When a serious buyer has been identified, negotiations naturally become more in-depth. A Heads of Term agreement is drawn up to reflect the results and provide a framework for the sale.
Buyer due diligence is one of the main stages of a business sale. The prospective purchaser hires professional advisors to scrutinise your accounting and financial documentation, and ensure the details you’ve provided are accurate and reliable.
When all terms and conditions have been agreed, including any warranties and indemnities, the sales agreement is drawn up and signed by both parties. This is a legally binding document and ensures your own needs, and the needs of the buyer, have been detailed.
Selling My Business has more than 30 years’ experience of successful business sales, covering all industries and types of organisation. For more information or advice on selling your particular business, please call one of our expert team of consultants.