Every entrepreneur or business owner needs an exit plan. For many, a sale is the end goal but did you know that the time to start thinking of selling is long before you want to make the sale? If you’re considering selling your business, there are some important questions that you’ll need the answers to….
How do you go about selling? What’s your business worth? Who are your potential buyers? Will it affect your taxes?
It’s a tough time to be trading as a small business and you’ll already be feeling the pressure. Deciding to sell is a big decision – and one you won’t have made lightly. There’s a lot to consider and we know it can seem overwhelming.
But the good news is that every business sale goes through pretty much the same process. If you have an understanding of this process you can be better prepared for a sale and make it less stressful for all involved.
Preparing Your Business To Sell
Preparation is key when it comes to selling a business. Timing is everything. It could mean the difference between a quick sale or a long, drawn-out process. It’s good to sell when profits are at their highest, markets are on the up, accounts are in order, a great team is in place and there’s a good client list.
But this means you have to be ready.
Getting the right advice and preparing in advance can help make sure that all the important factors that can influence your sale price or even cause a sale to fall through are in order. Speak to your accountant, get your books prepared and seek legal advice now, so you can be ready for a stress-free sale when the time comes.
How To Value Your Business
Growing a business takes years of dedication, time, energy and expense. How do you place a value on that?…
When valuing a business, many people need to call in the experts. They’re the people who’ll be able to give a realistic valuation. Taking into consideration the physical, projected and current values of a business. They’ll also be able to advise on the tax implications and can read more about that later in this blog.
Remember, you've invested a lot financially, mentally, emotionally and physically in your company over the years. What the experts are telling you might not tally with your expectations, but they’re looking at it from an unbiased and fair position in the current marketplace.
Keep an open mind. Markets fluctuate, stock value changes and people always want a bargain. Haggling doesn’t just happen at foreign tourist markets. Be prepared for a lot of toing and froing.
Once you know how much to ask for, it's time to find someone to sell to…
Where To Find A Buyer
One of the biggest challenges when it comes to selling a business is finding a buyer. It can be easier said than done. Especially in today's climate of small business uncertainty.
There are several ways people find a buyer for their business including:
Online Forums & Social Media
Business forums and social media allow you to directly hunt down prospective buyers and make a direct approach.
Online For Sale Directories
Business directories such as Daltons, www.uk.businessesforsale.com or www.rightbiz.co.uk allow you to list your business as “for sale”. Prospective buyers use these sites to search for potential investment opportunities.
A sales broker helps to find buyers and get the best deal. They handle the marketing and part of the sales process for you. They often have a network of contacts that might be looking for a business to invest in so they may have a buyer lined up fast.
Negotiating & Completing The Sale
Negotiating is a skill that’s developed over time. No one is born a confident, comfortable and concise negotiator. So if the thought of it makes you feel a little nervous, don’t stress about it, you’re not alone.
The main things that a buyer will want to discuss are cost and terms.
If the valuation is right, there’s usually room to manoeuvre so that neither the seller nor buyer misses out. People usually set a minimum figure they won’t go below so that they don’t make a loss. Putting everything in writing helps to prevent any confusion or disagreements late on down the line.
Now For The Actual Sale…
This is when a trained solicitor is often required. They have the professional training, experience and knowledge needed to complete everything properly. They’ll draw up all the legal agreements required to sell and check everything over.
This may include;
- Drawing up purchase and sale agreements which cover the terms of the sale.
- Reviewing lender documents if the buyer is planning to borrow money to fund the purchase.
- Preparing lease agreements if any of your premises, equipment etc. is leased.
- Completing the document that transfers the business assets to the buyer, known as the Bill of Sale.
- Creating a non-compete agreement to prevent you from starting a new business in direct competition with the one you’re selling.
What About Taxes?
How much a business sells for will affect the tax liability. The tax someone pays will depend on the type of business they’re selling and how they sell it, e.g. asset or share sale.
Some taxes involved with selling a business are Capital Gains Tax (CGT) and Corporation Tax on any profit made.
It’s not all bad news about taxes. There are some forms of tax relief that could be claimed to save some money. If appointed, a sales broker will advise on taxes, as will an accountant or legal professional.
The Right Advice Can Make All The Difference
There’s a lot to consider when you decide to sell your business. If you aren’t properly prepared with the right advice, you could end up out of pocket.
At LegalDrop, we’ve partnered with some of the best legal advisors in the UK who are dedicated to providing first-class legal advice and help for you and your business.
Take the first step towards making a successful sale by clicking here to find your perfect legal match.