- If you are thinking of selling your business in 2023, now is the time to start preparing. Selling a business is a complex process that requires careful planning and preparation, whether you are planning to sell to a competitor, an investor, or a new owner. To help you get started, I’ve put together a comprehensive guide to preparing your business for sale, with expert tips and key considerations to keep in mind.
- Expert Tips for Preparing Your Business for Sale
- Obtaining a Realistic Valuation of Your Business
- Managing Your Finances: Accounts and Financial Information
- Dealing with Cash and Debt
- Corporate Governance: Making Sure Your Filings are Up to Date
- Preparing for an Extensive Due Diligence Exercise
- Confidentiality Agreements
- Tax Considerations: How to Structure the Sale of Your Business
If you are thinking of selling your business in 2023, now is the time to start preparing. Selling a business is a complex process that requires careful planning and preparation, whether you are planning to sell to a competitor, an investor, or a new owner. To help you get started, I’ve put together a comprehensive guide to preparing your business for sale, with expert tips and key considerations to keep in mind.
Expert Tips for Preparing Your Business for Sale
To prepare your business for sale, there are a number of key considerations and steps that you should look to take. These include obtaining a realistic valuation of your business, managing your finances, implementing good corporate governance, preparing for due diligence, and understanding tax considerations. Let’s take a closer look at each of these in turn.
Obtaining a Realistic Valuation of Your Business
Before you engage in any sale negotiations with a potential buyer, it is important to have a realistic idea of the value of your business. Getting an early indication of your business value is easier than you might think – if this is of interest give us a call. Ultimately, when you go to the market to sell your business you may need to obtain specialist valuation advice, but we are a good starting point for a realistic view of where your business is right now. It’s quick (can be delivered in 48 hours) and great value at £1995 + VAT for the indicative valuation report which includes financial performance benchmarks against your competitors.
It’s important to recognise that a business is worth what someone is willing to pay for it. Factors that are taken into account when valuing a business may include the current market conditions, current and future cash flows, the business’s assets and liabilities, and its competitive position in the market. A realistic valuation will help you to prepare for negotiations with potential buyers, and may also help you to identify areas where you could increase the value of your business.
Managing Your Finances: Accounts and Financial Information
Most buyers will conduct an extensive financial due diligence exercise, so it is important that your accounts and other financial information is up to date and readily available to a potential buyer and their professional advisors. Make sure that your annual accounts are up to date. This will include profit and loss statements, balance sheets, and cash flow statements. If there have been any significant changes in your business’s financial position since your last financial statements, you should update them accordingly.
Dealing with Cash and Debt
Have a push on getting in cash and also dealing with any aged debt. A buyer may try to reduce the price or pull out of the deal entirely if you have a lot of aged debt and a poor cash position. Also, managing these aspects of your business is good practice, whether or not you intend to sell.
Corporate Governance: Making Sure Your Filings are Up to Date
Make sure that your Companies House and other filings (including HMRC) are up to date. A potential buyer will pick up on any filings that are not up to date as part of their DD exercise, so the more that you can do to address this beforehand the better. It also inspires more confidence in a buyer if things are in good order from a corporate governance perspective.
Preparing for an Extensive Due Diligence Exercise
Prepare for an extensive and time-consuming due diligence exercise by the buyer. Make sure that all relevant documents are to hand and can be made available to the potential buyer and their professional advisors. This should speed up the DD process and enable it to go more smoothly, again inspiring confidence in your buyer. In addition to financial due diligence, the potential buyer will undoubtedly ask for copies of a variety of documents including contracts of employment, contracts/terms of business with suppliers and customers, insurance policies and details of any recent or ongoing claims or complaints. You should make sure that this information is readily available.
I guarantee you will get asked questions that you don’t understand why they are asking. It doesn’t matter why, it’s addressing the buyers approach to risk. I also guarantee at some point you will ask “When is this going to end?” (usually with a slight sob). Knowing it’s going to be tough gets you ready.
Always have a confidentiality agreement or NDA available to be signed by a potential buyer before you start providing them with information in relation to your business. The NDA should specify what information is confidential and how it can be used by the buyer. It will also provide for damages in the event of a breach.
Tax Considerations: How to Structure the Sale of Your Business
There are often alternative ways in which to structure the sale of your business and tax advice will probably influence which option you go for. Some of the most common structures include a share sale, an asset sale, or a management buyout. Each structure has its own pros and cons, so it’s important to get professional tax advice before making any decisions.
Selling a business is a complex process that requires careful planning and preparation. By following the expert tips and key considerations outlined in this guide, you can maximise the value of your business and prepare it for sale in 2023. Whether you are planning to sell to a competitor, an investor, or a new owner, these steps will help you to achieve a successful outcome and move on to your next adventure with confidence.
Are you stuck in the day-to-day of your business with no time to plan for the future? A Professional Business Mentor is just the leverage you need to get out of the rut and fly. Discover how you can make your business worth more AND avoid leaving money on the table when you finally leave your business. Click here to contact Christine by email alternatively, you can book a call with the Business Mentor of the Year 2020, author and speaker. Who helps business founders get their businesses exit ready so they can enjoy a happier, richer future. She saves them THOUSANDS and increases the value of their businesses by MILLIONS.