Guide To Selling Your Business
Selling a business is a complex process that requires careful planning and execution. Throughout the process, it’s important to work with experienced professionals such as solicitors, accountants, and business brokers to ensure a smooth and successful sale.
(1) Preparation
This involves identifying your reasons for selling and preparing your business for sale. You may need to work on improving the financial performance of your business, ensuring all legal and financial documentation is in order, and identifying potential buyers.
(2) Valuation
Determine the value of your business by considering factors such as the financial performance, market trends, and future growth potential. This will help you determine a fair asking price for your business.
(3) Marketing
Create a comprehensive information memorandum to showcase your business’s history, financial performance, assets, and growth potential. Use it to market your business through online ads, industry publications, and direct outreach to potential buyers.
(4) Negotiation
Once you’ve identified potential buyers, you’ll need to negotiate the terms of the sale. This may include price, payment terms, and other conditions of the sale.
(5) Due Diligence
After agreeing on the terms of the sale, the buyer will conduct due diligence to verify the information you’ve provided about your business. This can include reviewing financial records, contracts, and other important documents.
(6) Completion
Once due diligence is complete, you’ll sign a purchase agreement and transfer ownership of the business to the buyer. This may involve transferring assets, licenses, and other legal and financial considerations.
Who is Succession Planning For?
It is important business owners understand their options fully. Too many SME owners just close their businesses when they exit. We want to ensure that the business owners can go to their next venture knowing they have made a good deal. It is also important to ensure their business is in safe hands and be fully ready to sail off into the sunset for their next venture, retirement or new role.
Business owners often devote a significant part of their life to building their businesses but may have not spent any time considering an exit or planning for an exit. The Succession Planning team aim to ensure that business owners:
- Maximise consideration on exit
- Decide upon the right time for exit
- Find the best cultural fit for the business
Selling their business is often the biggest transaction they will ever complete, and they must be provided with patient, detailed advice to navigate them through the process. We go through the following with business owners:
- Is their business ready for a sale
- Could their management team take over the business (MBO)
- Possible valuation range of the business
Complete confidentiality and matching business synergies enables us to give you the options on where to take your business next:
- Introducing potential buyers/sellers
- Comprehensive and detailed marketing & direct marketing campaigns to ensure all potential audiences have been reached
- Providing pre-transaction tax planning advice
- Identifying strengths and suggesting methods to overcome weaknesses
- Project managing each transaction from initial concept through to completion in the most commercially aware and tax advantageous way possible
What do I need to do to sell my business?
Selling a business can be a significant milestone for any entrepreneur or business owner, whether they are planning to exit soon or have already completed the sale. However, the process of selling a business involves many considerations, both before and after the sale, that can have a significant impact on the success and profitability of the transaction. By addressing these critical factors both before and after the sale, you can increase your chances of a successful and lucrative exit from your business.
Pre-exit considerations
There are various items to consider before selling your business, we go through all of these in detail with the business owner and where applicable involve our expert associates:
- Tax planning
- Business plan
- Timing for sale
- Ownership structure
- Organisation structure
- Processes and procedures
- Current business structure
- Items that affect the valuation
- Would an asset or sale be most appropriate
- Is there anything that could be done to increase the value
- Are all contracts in place, customers, suppliers, employees
Post-exit considerations
These are often neglected, however, we believe that it is equally important to look after the business owner long term:
- Personal tax
- Life Coaching
- Wealth management
- Planning for life after exit
- Career coaching for those looking for a new direction
- Considering consultancy, NED or charity role options
When is the right time to sell my business?
To ensure a smooth and successful sale of a business, it is essential to consider factors such as timing, management information, processes and legal records, second-tier management, and sales and clients. Buyers often look for a gradual handover to ensure the continued success of the business, and it is essential to have well-documented processes and reporting to instill confidence in the buyer.
So what are the kinds 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. Even if your ideal exit date is in 3 years, the time to start working on your exit is now. Why so long? Well assiming your exit date is August 2025, let’s work backwards:
- 24 months – Assuming that the buyer will want to stay in the business for max 2 years handover, and will help maximise earn out
- 3 months – Lawyers & Advisors to finalise SPA (sale purchase agreement) and perform due diligence
- 1 month – Exclusivity to pin down Heads of Terms
- 1 month – Final potential buyer meetings and pin down best offers
- 3 months – Discussions with potential buyers
- 3 months – Marketing to find the best potential buyers
- 1 month – Working with the business to ensure all info ready for marketing
- Start – Instruct Succession Planning Ltd
All elements can be accelerated in certain circumstances. However, it is always possible that the buyer changes their mind in the initial process and then we have to go back a step. Sometimes it is a bit like snakes and ladders!
Where can I find the right partner?
There are various Mergers and Acquistions (M&A) partners that could be considered. Here’s what our Succession Planning Ltd team specialize in:
Succession Planning Ltd
The Succession Planning team focus on SME businesses, typically £1m-£15m exit value. Here are just some of the reasons why we believe the Succession Planning team could be the right partner for your sale:
- Founders have over 20 years of M&A experience in each
- Founders have run other businesses too, therefore completely understand the business owner experience
- 85% success rate
- We work with the SME until a deal is done
- Friendly & Approachable
- Business advisors for the full sales cycle
Businesses we have worked with share their experiences of the M&A process and how The Succession Planning Team were not only able to maximise the selling price of their business, but also provide impartial and comprehensive advice to ensure a seamless transaction.
Why Should I Sell My Business Now?
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All the stats point to 2022 being a strong year for M&A. This is in part due to a requirement for transactions as businesses address factors such as decarbonisation and digital transformation.
More significantly, the ramifications of COVID gave SME business owners the chance to reflect, whilst the continued challenges of rising energy costs, labour and supply chain issues (coupled with inflation and interest rate rises) have led to many business owners re-considering their position.
Whatever your reason for selling the company, we want you to get the most out of it. Please give us a call and we will be happy to discuss your best options and what else is required to maximise the price you achieve for your business.
We ensure that all our efforts are intrinsically focused on helping our clients to achieve their aims. We work in partnership to understand and fulfil our client’s commercial objectives. Whether it is a cash injection, a part equity sale, or a complete company/trade and asset sale.
More Info: What Makes A Business Sell