Sell your Business - Part Two

Also read: Business Turnaround | Trading Out | Refinancing

Preparing your business for sale

Selling your business involves several stages that need to be completed to achieve a successful sale:

• Preparing your business for sale to maximise the sale potential
• Value your business - cutting debts and costs could help increase it's value
• Identify the type of potential buyers for your business
• Promote and market the sale of your business to generate maximum interest
• Meet and negotiate with potential buyers
• Completing legal due diligence with the buyer
• Finalise the sale and transfer ownership of the business

Preparing this in advance will help make the whole process smoother.

When it comes to valuing your business, it is advisable to seek specialist help from your accountant, solicitor or from a corporate adviser. They can advise you on an appropriate valuation method, help you get a realistic valuation, help you identify and market your business to potential buyers.

Meetings with potential buyers

The way you handle your initial meetings with potential buyers is crucial in gauging their interest and help build relationships with potential buyers to discuss key issues.

• Draw up a non-disclosure agreement for prospective buyers to sign.
• It may be worth allowing potential buyers to look round your premises, however do not want to give too much away at this stage.
• You will need to provide accurate financial information, including audited accounts and forecasts for the year ahead.
• Ask your advisers how best to releasre commercially sensitive financial data.
• Provide potential buyers with a valuation you're expecting for your of your business drawn up with your advisers.

The structure of the deal

The uncertantity of a drawn-out sale could be damaging to your business, so as well as price, the potential buyer's propsed timetable for completing the deal is important.

• Check for proof of financial capabilities of the prospective buyer can follow through with their promises and ability to pay the price they are offering.
• Plan how the payment will be structured whether it is one lump sum payment or a deferred payment which could be more tax efficient.
• If you are offered a combination of cash and shares in the purchaser's business make sure you know the shares value and companies security.
• Find out if future deferred payments are guaranteed and not based on the business's performance.
• Remember that you're likely to have to pay capital gains tax (CGT) on the sale of your business. Speak to your accountant to discuss how you can minimise your liabilities for CGT and make the most of the reliefs available.
• A key part of any offer will be the responsibility you have to take on for any business liabilities such as employees, outstanding debts and tax and VAT obligations.
• It's likely that your buyer will ask you to provide them with reassurance about what they've bought and protection against future liabilities in the shape of warranties and indemnities. Warranties provide legal confirmation that certain facts relating to the sale of the business are accurate. Indemnities are promises to reimburse the buyer for any losses resulting from specified future events.