Selling your business is the ultimate aim of many business owners – it’s the reason you get up in the morning and put in the hours over several years, to one day cash out and realise your hard work, enabling you to move onto to the next stage of your life.
The process of selling your business can be a long and arduous one, but it is important to get it right for a successful outcome.
We have helped many business owners to grow their business and get it ready for sale, and then through the subsequent process of selling it. Based on our experience we have compiled a list of considerations, should you be thinking about selling.
Things to consider when selling your business
1. Making your business fit for sale
Consider what you are selling. Does your business run without you being involved? Are there sufficient systems and a structure in place to attract a buyer? Or are you neck deep in the day to day and the business couldn’t run without you?
Make sure the business is in good order with minimal skeletons in the closet and systems that mean a buyer could run your business when they take the reins.
2. Valuation of the Business
Understanding the true value of your business is crucial. This involves looking at your financial statements, assets, liabilities, customer base, market position, and future earning potential.
Get an understanding of how businesses are valued – such as a multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) with add backs. Find out what other businesses of a similar nature have sold for.
3. Preparation of Financial Records
Ensure your financial records are up-to-date and accurate, keep your compliance sheet as clean as possible and avoid paying taxes late. Potential buyers will want to see a detailed history of your finances, including profit and loss statements, balance sheets, and cash flow statements. Transparent and well-organised records can enhance buyer confidence.
4. Tax Implications
Selling a business can have significant tax consequences. It’s important to understand how the sale will be taxed, whether it’s as a capital gain or regular income, and how to structure the deal to minimise your tax liability.
5. Legal Considerations
Ensure that the legal aspects are up to date and in good order, including reviewing any contracts, leases, or agreements that you have with clients, suppliers, or employees.
6. Timing of the Sale
Timing can significantly impact the value you receive for your business. Selling during a period of strong financial performance or when market conditions are favourable, can help you get a better price. Additionally, consider your personal readiness to sell.
7. Finding the Right Buyer
Identifying potential buyers can be a challenge. You want someone who sees the value in your business and is willing to pay a fair price. This might include competitors, investors, or individuals looking to enter your industry.
You are going to have to use a broker but find the right one – make no mistake selling a business is a costly business.
8. Negotiating the Deal
Be prepared to negotiate the terms of the sale, including the price, payment structure, and any conditions. You might need to decide whether you want a lump-sum payment or are open to financing options like instalments or an earn-out, where you receive part of the payment over time based on the business’s future performance.
9. Transition Period
Consider if you’ll stay on for a transition period to help the new owner take over. This can be a condition of the sale and might involve training, introductions to clients, or helping to smooth the operational handover.
10. Confidentiality
Maintaining confidentiality during the sales process is crucial. You don’t want to alarm employees, customers, or suppliers prematurely, as this can impact the business’s stability and value. Ensure you get solid NDAs signed – your broker / legal team can help with this.
11. Emotional Readiness
Selling a business can be an emotional process, especially if you’ve built it from the ground up. Reflect on your personal goals and readiness for this major life change.
How we can help
Our experience in helping Directors to sell their business means we are well placed to help you sell yours. Our ‘Getting your business ready for sale’ service will help you understand the process and give you guidance of what you need to do to successfully maximise the value you receive for your business. If you are considering selling, why not give us a call and have a chat!
