Selling your Business – What to Consider

Are you considering selling your business? Maybe you’re not ready quite yet, but it is starting to feel like an idea you rather like. Then this is a great time for us to explore this in more detail…

So, we’ve talked before about what to consider if you want to hand your business down to another person in your family, or a loved one. But there are different considerations if you want to sell the business to a third party.

You need to maximise the value in the business, to help you secure the best price for it.  There are a number of things you can do to help that:

  • Reduce any unnecessary overheads to be as profitable as possible.
  • Document processes and procedures – so anybody can walk in and take on any role. They might need some help, but it’s about not being reliant on any one individual.
  • Reduce debtor days, so there are limited risks of bad debt.
  • Ensure the business is not solely reliant on you. Selling a business that is centred around one person does devalue it.
  • Be confident that your business is fully compliant with any legislation and regulations specific to your sector
  • Keep all your records up to date, and file all of your returns on time with HMRC

To be honest, that’s just scratching the surface, and we would recommend you reach out to an expert in this area for more advice.

However, beyond maximising the value, you also need to consider what you want from the business.

Here’s what to think about:

  • Do you want to be paid and walk away? Effectively, take the money and run. That can be possible, but usually is not the best way to earn the highest sale value.
  • Would you like to reduce your hours but stay on as a consultant?
  • Are you happy to remain an integral part of the business for a defined time – 1-3 years say? This is an attractive proposition to many buyers, and can help you achieve a better return. This would typically allow you a phased payment plan.
  • Do you want to sell all of your shares, or retain some?

Part of your decision to sell could be around realising a specific amount.

You need to be confident that is realistic for your business. Before you start down this road, it is wise to do some research. What is the multiple for your sector? What have similar businesses sold for in recent times?

When making your plans, don’t spend the money too quickly! Remember there can be quite a big tax bill to pay, dependent on the sales figure. Entrepreneur’s relief is available up to £1million, but tax is payable on anything over that figure, at 20%.

Selling a business is fraught with challenges. During the due diligence process anything can come to light, even things that you can’t see as an issue. It can be incredibly stressful, but by going in with your eyes open, you can reduce some of that stress.

If you would like to find out more about how we can help you, please contact us on 01344 875 310.

Selling your business