There can be a few reasons why you would want to sell your business – you may have worked hard to build it from the ground up, nurtured the company and poured your time and effort into it and are now ready to retire and reap the benefits.
Or, you may be facing a loss in sales and do not have as strong a business model as you would have hoped. You may think that someone else can bring fresh ideas, resources and skills to carry your business forward.
You may look to sell after considering other options, such as a management buyout or a commercial loan.
No matter what your reason for selling, it is important to ensure you go about this wisely. Trying to rush the process and even miss out important steps just to put the business in someone else’s hands can result in getting a much lower selling price than you deserve, and may mean you hand the company over to someone who may not have its best interests at heart.
Below, we break down each step you need to take when selling your business to get the best outcome.
Prepare for sale
Preparation is key here. You want to make sure you have cleared any outstanding debts, get your accounts in order, document key processes within your business and check that all filing with Companies’ House is up to date.
Get your business valued
Now is the time to find out how much you could gain by selling. You could do this a few ways yourself, either through calculating an EBITDA multiple or your Asset Value. If you work this out correctly, it can be the basis of a great deal. Alternatively, an experienced business broker can help you value your business even higher than you thought was possible – having an external perspective on the value of your assets can help you get a better deal as you may be undervaluing yourself.
It’s a good idea to really think about your ideal buyer and define a proper strategy before rushing to sell your business. This will help you to reach your target market better rather than just throwing it out there and hoping prospects will pick it up.
Market research can be really useful in this instance. Thinking from the perspective of your ideal buyer will help here – what information would they want to know? Make sure this information is readily available in your marketing efforts. Why would they want to buy? What makes you stand out from other businesses? Detail it!
During this process it is a good idea to tell your staff what is happening and assure them of job security – they are likely to find out anyway in the event of business viewings from prospective buyers.
Pick the right buyer
Once you have got a few offers, consider the main types of buyers that will likely come your way:
Individual buyers – they may be seeking a new business adventure and could be their first time owning a business
Financial buyers – these buyers purchase businesses, make a profit and then sell them on
Strategic buyers – these may be your competition or within your industry and are looking to reduce competition
When picking a buyer, make sure you can spot the above and which ones have your business’s best interest at heart.
Finalising the deal
Once price and terms have been agreed upon, buyers will now undertake due diligence to ensure everything you have promised them will be delivered, along with fact-checking on numbers, asset values and more. At this point they may ask for specific documents from you – if you prepared these at the start, this should be a breeze!
They will mainly want to look at financial, legal and commercial aspects of your business, which can include accounts, intellectual property protection, tax compliance and more.
When this process is complete, it’s time to hand over. This can include providing staff information, contact details of business partners, an inventory, key process documents, accounts and more. Remember to be on hand as much as possible for any questions during this process.
Now you have handed over the business you can relax knowing that the hard work is over and you can either retire and enjoy the money or move onto your next business prospect!
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