A successful business sale involves careful planning and preparation, typically over several years, but also having a clear idea of your main objectives and an accurate business valuation.
You might be selling to extract maximum profits for your retirement, or perhaps you have your eye on an exciting new business venture, but whatever your reasons for exiting the business, it helps to understand the process.
You might use a specialist business sale brokerage that can negotiate on your behalf and advise on other issues as the sale progresses or feel confident to progress the sale yourself with the support of your solicitor and accountant.
What do you need to consider when selling a business?
Business value
With multiple valuation methods available for UK businesses, it’s important to seek out a specialist business valuer who understands your sector. They’ll be able to check the recent sales prices of similar businesses to yours and provide an accurate valuation so it’s not overvalued or undervalued.
Timing the sale
Ideally, your business will be performing at its peak when you place it on the market so you can attract plenty of interest and a choice of potential purchasers. Preparing well in advance helps you gain control over the process and understand when is the most opportune time to sell.
Your ideal buyer
Developing an idea of who your ideal buyer would be, perhaps based on their income, background and experience, or desire to purchase quickly, helps to guide your marketing and can reduce the costs in this area.
What are the practical steps to take when selling a business?
Professional business valuation
Your business’s value will incorporate multiple elements, including the number and value of its assets, your industry, projected sales and profit figures, and its reputation in the market. The valuation should provide some room for downward negotiations by the prospective purchaser and allow for a minimum amount you’re willing to accept.
Prepare a sales memorandum and a non-disclosure agreement (NDA)
The sales memorandum is the first descriptive document about your business and includes a broad outline of your operations along with limited financial information. For this reason,
drawing up a non-disclosure agreement is advisable to protect all commercially sensitive information.
Negotiate the sale
Your buyer is likely to want to negotiate on the sale price or other terms so understanding their priorities and main objectives from their purchase can help you identify areas for potential discussion. It’s crucial to document negotiations and any agreements made verbally so that everyone understands the terms of the sale before official contracts are drawn up.
The sale agreement and other legal documents
One of the final steps in selling your business is instructing your solicitor to draw up the sale agreement. This documents the results of your negotiations and might include warranties and indemnities, a non-compete clause that states you won’t set up a new business in competition within a specified period, the price to be paid, and the completion date.
Preparation is key when selling a business
Selling a business is typically complex but by considering what you have to do well in advance and preparing your business you can gain some control over the process. In fact, preparation is key to extracting the maximum profits and reaping the rewards of all your hard work in building up the business.
The support of business sales, legal, and financial experts, also underpins a successful transaction and reduces some of the stress associated with such an important deal so you can transition smoothly to the next stage of your life. This article was written by guest author Paul Williamson of Selling My Business. Paul’s expertise is in the valuing and sale of businesses and commercial properties on behalf of clients. Over his extensive career he has been involved in the sale of literally thousands of businesses, from relatively small retail businesses through to more notable, multi million pound business sales.
