You’ve decided it’s time to sell your business and you’re putting together an exit strategy, so what are the kind of things you should be preparing for?
Given that implementing your exit strategy and selling your business can take up to anywhere between 1 and 2 years, it’s important you take some key steps to ensure your business is ready to sell when the time comes.
We’ve compiled some short and succinct tips to consider when readying your business for a sale:
1. Obtain a most probable sale value: First things first, it’s a good idea to know just how much you can expect your business to sell for in the current market. Of course you will have your own ideas as to how much your business is worth, but it’s important you obtain an objective valuation from a professional source. In doing so, you’ll also be able to gauge your position in the market and identify some of the strengths and weaknesses you can hopefully rectify before marketing.
2. Ensure your accounts are up to date: In general, any interested buyers will require at least 3 years of accounts info. The more detailed the better , in the first instance it demonstrates a well-run company, secondly it provides all the information required in the memorandum of sale , without having to take additional time compiling and thirdly it will ease the process of due diligence.
3. Speak with your IFA: It’s important to go into any potential sale with all the facts. Your financial advisor can help you to understand any tax implications and also make all the options on structuring the deal available to you.
4. How profitable is your business? You’ll likely have quite a good grasp on the profitability of your business, but be sure to consider your non-operational expenses as well. All these expenses need to documented, including any infrequent expenses you may have posted in the past 3 or so years that any interested buyer can exclude when analysing recurring cash flow.
5. First impressions count: Any interested buyer will likely wish to visit the premises, not only to see what they could be purchasing but often to get a feel for the atmosphere around the business as well. It’s important they’re not walking into a factory or office that is paper strewn and generally chaotic. A tidy, well organised environment gives the perception that the management team and the business as a whole follow suit.
6. Get your legal documentation in place: Be sure you have all of your employee, customer and supplier contracts, agreements and any other leases in order and up to date. It’s likely you will need to provide these at some stage and so it’s a good idea to have them ready to go.
7. Should you stay or should you go: An interested buyer may consider you to be integral to the day to day running of your business and any potential deal may hinge upon your continued involvement for a defined period. You need to be clear on how long you are prepared to stay on with the business and have a definitive plan in place to phase you out of the business when the time comes.
8. Why are you selling? You’ll no doubt have been considering a sale for quite some time and have made a clear decision that you are going to sell. Some buyers like to know the reason you are selling your business; be it retirement, a new venture or otherwise. After all, if the business is performing so well why are you prepared to walk away? Ultimately it’s your decision to sell and your reasons for doing so are personal to you, but it sometimes helps to give the buyer the full picture.
9. Get a good team in place: If your accountant or financial advisor doesn’t have experience in business mergers or sales, ensure you enlist the services of an accountant and/ or solicitor with prior experience. Their acumen will be invaluable to you, as will the help of a good business broker to hand hold you through the process and act as your intermediary.
10. Stay focused: With all the time spent concentrating on preparing your business for sale, it’s easy for you to let your business performance slip whilst doing so. You’ll need your senior management team to ensure it’s ‘business as usual’ to avoid giving any potential investors ammunition to negotiate the price down due to falling profits and efficiency.
Selling your business can sometimes be a long and drawn out operation so you need to remain patient and focused on getting a successful outcome.
There will likely be ups and downs throughout the process and no doubt countless phone calls and emails gathering information, what’s important is that you are as prepared as you possibly can be and nothing is left to chance.
You won’t be alone on this journey, as you’ll have the support of (hopefully) a great management team, accountants, solicitors, a business broker you trust and of course, your family and wider support network.
If you need any advice or further information on making a business acquisition or indeed selling your own business, feel free to give us a call on 0845 337 3327 to speak to one of our consultants.