So you want to sell your business? The place where you’ve spent more time than with your family; invested money which you’ve sometimes had to borrow in order to expand or buy new equipment; given your heart and torn out your guts; worked anywhere from 60 – 80 hours a week, maybe more; tackled a recession and seen a chink of light at the other end.
Now think of decorating a room. Any professional will tell you it’s 80% preparation and 20% finish. I wouldn’t go quite that far, but the planning is all important when it comes to selling.
In fact, you should be planning your exit as soon as your name goes up in lights above the door.
But let’s fast forward. Let’s assume you’ve had the business for several years, even decades, and you judge the time is right to sell.
It’s a reasonable market, and you’re itching to put your life-changing decision into action. What are the steps you must take to get your business shipshape?
When you are preparing to sell a business, the first rule is to give yourself plenty of time. Most business agents advise planning at least a year in advance – sometimes longer. Of course it depends upon how big your company is. But don’t rush.
Here are my ten top tips to get you thinking… and planning;
1. Have at least your last 5 years’ figures neatly filed
Study them. Is there a poor or disappointing year? One is allowed, but if there are two or more, delay the selling process and make the present year as good as you possibly can, then use the 6 years, as the poor one will be diluted. Your accountant should be able to advise you on this.
2. Speak to a tax specialist
Your accountant has probably advised you on your tax affairs where the current running of the business is concerned, but to sell your company you need expert advice.
There are numerous ways to avoid (not evade!) or reduce some of those frightening demands.
3. Inspect your premises through a prospective buyer’s eyes
Has the property been well-maintained? If it’s an old building it would be wise to bring in a surveyor who will give you a detailed report which you should act upon.
Make sure all outstanding repairs are carried out, and all the invoices are paid up to date. Have the rooms freshly painted, the carpets cleaned or renewed, and get rid of shabby desks and chairs, filing cabinets and even small items such as waste-paper baskets that have had their day, and replace with new.
Don’t worry that the staff will think something fishy is going on; they love changes and improvements in their environment and will be delighted.
4. Have Fire and Health & Safety checks
Carry out their recommendations straightaway and make sure you display the appropriate certificates after they’ve signed you off.
5. Update your computer system if it’s more than 3 years old
Again, staff will be happy – that is, after the initial grumbling during the training period. You might think this is a waste of money; that the new owners will have other ideas about alternative computer systems, but I would still go ahead.
If the prospective buyers see your office equipment belongs to the age of the dinosaur, they will conclude that you run an old-fashioned business, haven’t kept up with the times, and their offer will reflect this.
6. Make sure the staff manual is updated and signed by every member of staff
Also, that you have copies of everyone’s offer letter and terms and conditions, and that they, too, are all signed. This is very important at the changeover so staff don’t lose out on any part of their package.
You should speak to an employment specialist or solicitor about TUPE (Transfer of Undertakings [Protection of Employment] Regulations 2006. When you sell under TUPE you will have protected your staff from any alterations in their contracts by the new owners.
7. Have at least two, if not three, valuations for your business
One valuation could be from your accountant who should have a fair idea what it’s worth, but accountants tend to be cautious.
You might get a more ambitious valuation from a business agent, but be wary. They want your business.
Don’t go for the agent who comes up with the highest figure, but the one you feel most comfortable with. Someone straightforward and sensible, who doesn’t try to push you into signing up immediately (under no circumstances do this), and who you feel is genuinely interested in your business.
Let those that are providing a valuation to give their opinion on price before you give your own views. Confirm whether this is an asking price or what you should end up with.
8. Start scouting around for the right business agent
This is almost as important as finding the right buyer (your ultimate goal), and the agent is probably the one who will produce such a candidate.
Go by recommendations from anyone you know who has recently sold a business successfully, or by your solicitor or accountant. They can usually advise you on a good business agent.
9. Be prepared to change solicitors purely for the sale
You will already have a solicitor who takes care of your personal and business affairs, but selling a business requires an expert in that area.
The Sale & Purchase contract is the most important one in your working life you will ever file safely away, and it has to be absolutely watertight.
10. Keep your wits about you at all times
If you’ve never sold a business before you’ll be entering into another world where you’re going to feel everyone out there is ready to relieve you of enormous chunks of money.
Yes, selling a business is expensive but you don’t have to view everyone with deep suspicion. Pay the best you can possibly afford to have the best people represent you, but don’t just turn everything over to them, erroneously thinking they are the professionals and can get on with it.
Keep in control, take note of your instincts, rely on your first impressions of prospective buyers when you come to interview them, and if you feel uncomfortable about anything or anyone – and that goes for the professionals involved as well – then call a halt in the proceedings and take appropriate action.
It’s now over to you… Have fun.
About the author
This article was written for ByteStart by Denise Barnes, author of Seller Beware – How Not To Sell Your Business published by Biteback Publishing.
More help on ByteStart
If you are thinking of selling up, you will also find the following ByteStart guides useful;