The process of selling a business can be broken down into two very distinct phases:
Phase 1 - preparing the business for sale
Phase 2 - listing the business for sale and completing the transaction
Getting the business prepared for sale can help the sale process run smoothly as well as give the best chance of getting the price you want. So, if you’re thinking of selling within the next three years, start planning right now.
here are steps you should consider taking:
talk to your accountant
your first point of call should be your accountant. organise a meeting and let them know of your plans. all accountants have been through this before with other clients and they will be able to provide practical advice. in addition, they should advise you about tax considerations, help with preparing a financial statement and put you in contact with solicitors and business brokers.
talk to a business broker
some people prefer to sell their business on their own, but experience tells us that a business broker will make sure there are no pitfalls or traps when the sale gets to the pointy end. it is recommended you talk to a couple of brokers well in advance, to allow plenty of time to form a trusting relationship well before the sale. just like accountants, brokers will have lots of advice, so you need plenty of time to act on their suggestions. remember, you will still most likely be working in your business, so making time for these sessions is very important.
get financial statements in order
the first thing any prospective buyer is going to want to see is the financial statements of the business, and not just the last financial year. they will want to see the last three years at a minimum. this is why talking to your accountant well in advance of actually listing the business is so vital.
spruce up the presentation
you wouldn’t sell your house with junk lying around and paint peeling off the walls, so don’t try and sell your workshop while it’s looking neglected, like a bomb has hit it. give the workshop a spring clean, get rid of excess junk and make it look as inviting as possible. a fresh coat of paint is cheap and can do wonders.
update the procedures manual
taking over a business is extremely daunting, so the more documentation that exists on how the business is conducted, the more appealing it will be to a prospective buyer. at the very least, a procedures manual will be essential, so if there isn’t one already, add this chore to your list of preparations for sale. a procedures manual contains things like a list of preferred suppliers, security and alarm details and many other simple things that have been taken for granted over the years. a potential buyer will be able to visualise themselves operating the business just by the detail contained in a good manual.
get the customer database in order
the customer database is the most valuable asset of the business, so make sure it is up to date with as much information as possible. the database must contain full name, address, mobile number and email at the very least. the database must be easily accessible to a new owner. a buyer might think twice if they discover that the database resides in an old ms-dos system that can’t be sorted or exported to a modern platform.
formalise all agreements
make sure all employees have up-to-date and signed job agreements or contracts. this doesn’t mean that employees can’t leave, but it shows good management that will be appreciated by a buyer.
significant trade or fleet accounts should be formalised and documented.
check lease security
the last thing a potential buyer wants to do is relocate the business within the first year or two of taking over. check on the lease expiry dates and if they are within a year or two of term, negotiate with the landlord and solicitor to have leases extended, to give the new owner some reasonable security.
if a long lease is already in place, let the landlord know of your plans because it is likely that the landlord may need to consent to an assignment of lease for your business premises to the purchaser. while a landlord cannot typically hold up consenting to an assignment of lease without a valid reason, it’s a good idea to keep them in the loop.
you might even know the potential buyer
history shows that the majority of small business sales are to someone already known to the business, like a competitor, an employee, a family member or an industry contact. if you have someone in mind, get on the front foot and delicately approach the idea. an employee might not be financially able to buy the business today, but with forward planning they may be ready in three years.
selling a business is a key milestone and life event. executed properly it can set you up for a comfortable lifestyle and create a better financial future for you and your family. therefore, it’s critical to get the right advice and start planning early to ensure you make the most of this opportunity.
this article does not, nor is it intended to, constitute legal, financial or other independent professional advice. please consult your professional adviser before relying on any information contained herein.