I’m selling my business – how do I prepare?

10 expert tips for selling a business

The idea of selling a business can feel a little daunting, but with the right knowledge and preparation, you can take control of the process to optimise the value of your business and achieve a smooth and well organised exit.

Our chartered accountants have helped many clients navigate their business exit and sale strategy over the years, helping them to maximise value to ensure the most favourable outcomes. Ideally, we recommend starting to think about your exit options two years before you plan to sell, but circumstances may of course dictate otherwise.

Whether you’ve been thinking of selling-up for a while to explore some new-found-freedom, or it’s an unexpected event caused by external factors – think pandemic, Brexit, recession, personal circumstances or buyer interest – the first step has to be seeking out some professional support.

Good preparation is key to maximising the value of your business and making the sale process run as smoothly as possible. The following tips for selling a business will give you an idea of the key things you need to question, consider or deal with in preparation.

10 tips for maximising value when selling a business

1. Explore your exit options – there are various routes to selling your business. Would a management buyout or transfer to employee ownership be the best option?, Or, could a sale to a trade or private equity buyer be feasible? Each type of sale comes with its own individual complexities, so get some advice or do some thorough research to help you decide the best route for your business.

2. Prepare your management team – there’s going to come a time when the business can’t rely on you, so you need to start preparing to handover. Strengthening your management team will give you a critical advantage in the eyes of most buyers. Having efficient and capable leadership in place is reassuring for a buyer and can lead to a more competitive sale price, with the added bonus that you may be able to exit the business more quickly post sale if the business is no longer heavily reliant on you.

3. Consider buyers’ needs – get to the heart of what a potential buyer will want, then refine your pitch accordingly, whilst taking any steps necessary to ensure that the business is capable of fulfilling its potential. Prospective buyers look for evidence and assurance, so you need to be able to demonstrate the value of the business now, and present a realistic outlook for its future success/profits. Develop a detailed business plan, define the purpose of the business, and deliver a vision of a profitable future, robust culture, good reputation and stable marketplace position.

4. Improve efficiencies – on the same principle as selling a property, when you’re selling a business, you need to tidy up before you invite viewers through the door. Identify and act on areas where efficiencies can be improved, such as reducing unnecessary costs and capital expenditure.

5. Optimise returns from assets – if your business has invested in assets, you need to make sure they’re performing. From equipment to property, look for opportunities to monetise any underutilised assets – similar to renting a spare room on Air BnB, but on a bigger scale.

6. Control shareholder expenses – now’s the time to get everything in order and tidy up the package you’re aiming to sell. To increase buyer confidence, you need to normalise shareholder expense habits and remove any personal/family assets that the business does not need to own. This will help you to ensure financial compliance and mitigate any ‘nasty surprises’ for the potential buyer.

7. Strengthen your financial processes, systems and controls – nobody wants to buy a ‘sloppy’ operation. If you want to make selling your business easier and enhance its value and appeal to buyers, it’s important to be able to demonstrate reliable controls, timely reporting and financial compliance. If you don’t have your own internal financial controller, this is the time to hire one or find outsourced support.

8. Reduce or remove potential risks – get the business housekeeping in order to facilitate a straight-forward due diligence and transition process. Your buyer will be reassured if you make sure:

• All client contracts are in place, signed and up-to-date
• Your client base is well diversified and the business is not heavily reliant on a small number of similar clients
• Employee contracts are signed and up-to-date
• Property leases are in place and details are correct
• Compliance checks are completed
• Required insurance is in place
• IT systems and controls are robust
• Any legal claims are resolved and adequately recorded

9. Understand your working capital – cash in the business not needed to fund its ongoing working capital can be extracted when you exit, so you need to maximise the amount that can be released. This area can be complex and is often overlooked, so you will likely need some support from a corporate finance expert.

10. Research your tax position – while you may be focused on maximising value before selling your business, you also need to make sure you minimise your tax exposure. There are various ways of doing this, including the utilisation of pensions, and consideration of both inheritance tax and capital gains tax plus the multitude of other taxes which might influence your situation. There’s a lot to say on this subject, so we’ll be writing more articles!

Ultimately, with the right preparation and planning, you can look forward to a straight-forward, educated and financially rewarding sale. Think ahead, consider the tips above and speak to a trusted accountant or financial advisor if you need help. Our Corporate Finance team is always on hand to offer their in-depth insight when it comes to selling a business and they can support you from the start to the final stages of notifying HMRC about your business closure. Please contact us if you’d like an informal chat.