If you are considering selling your business, our guide will help you get the best deal. Our corporate finance team have completed a wide range of business sales in several business sectors.
The level of economic growth over the last decade and the lower interest environment has increased the number of opportunities for owner managers to realise their years of hard work.
However, there are many aspects of selling a business including getting the maximum price possible, negotiating with buyers, keeping the discussions confidential and keeping business disturbance to a minimum.
If you are considering selling your business but don't know how much it is worth, the simple answer according to George Skelton, Partner with RDA Accountants , is that the business is worth what someone is willing to pay for it.
There are four stages to selling a business:
Set out below are 8 simple steps to help maximise the value of your business.
If you want to get the best price, forward planning is essential and 1 -2 years in advance is not too early to begin.
You should aim to get any contentious or disturbing issues resolved before the sale for example legal actions or uncertain ownership of assets.
If you believe your business can generate higher profits by reducing unnecessary costs or restructuring, make the tough decisions.
After you decide what you're selling, you need to know how to calculate what your business is worth. There's many techniques to determining the value, while paying particular attention to your specific industry.
Let's be straight, no one likes paying tax. The goal of tax planning is to understand what you need to take into consideration when factoring tax into selling your business. The sale needs to be structured to your circumstances in order to gain maximum tax advantage.
If you sell a business and no one is around to buy it, the valuation and preparation is irrelevant. There are many ways to market your business and get the word out that it's for sale.
You may be in the fortunate position of being able to identify a buyer for your business immediately but it would be in your best interest to commission a skilled researcher to identify additional potential buyers.
Understand the combination of the open market, buyers you already have in mind, and weighing up the best buyer for your business. It's more than just about the price. Do the buyer's values match yours, for your business, your employees and your customers.
Maintain confidentiality - if customers, suppliers or employees find out your business is for sale, it would create uncertainty and potentially reduce the value. Selling your business should be on a need-to-know basis and you should use advisor to maintain this confidentiality.
You should set yourself a top target and a lowest walk-away price. Never name your price to a potential buyer. A wise negotiator will decide before entering a meeting how far he is prepared to go and where he will draw the line and stop negotiation.
It is very helpful to have two people involved in the negotiations. While one must be the key negotiator with ultimate responsibility the second can act as a sounding board and help in maintaining the momentum of the deal.
A competent negotiator will involve relevant advisors such as financial and tax experts and solicitors. These should be brought in from the start and continually consulted.
So far, we've thought around our price, buyer and market but there a lot more we need to be aware of. Now it's time to complete our deep dive into the business itself. All things legal, commercial and financial are the focus here.
Keep your eye on the ball as too often a vendor's attention to their business wanes as they become embroiled in the sale giving the buyer an opportunity for a reduction in price.