Unless you’re a serial (and highly successful) entrepreneur, chances are you won’t have been through the process of selling a business before – so we thought some useful advice might be in order…
You may not have previously considered your accountant to be the best advisor when it comes to preparing a business for sale, but you may be surprised at how much knowledge and experience they have in this area – at CBHC we have considerable expertise in this type of transaction, so can guide and support you in achieving the best possible price.
It’s best to start planning early for any business sale, so that you can take steps to maximise its attractiveness to potential buyers – even something like its structure could have a bearing. For example, if your personal skills and experience are key to its success, then a buyer might want to retain you in some kind of capacity.
As with many things in business, you should get your paperwork in order. The first step of the sales process itself is to create a Sales Information Memorandum. This comprehensive document informs potential buyers of the company’s essential facts and figures, from key staff and organisational structure to business strategy and growth potential. Intended to demonstrate the benefits of buying the company and provide evidence to support the Business Valuation, it should also detail products and services, systems and procedures, competitive advantages, location and premises, financial and market data, customers and suppliers, and indicate any reliance on current owners.
Setting the right asking price is important too – too high, and you’ll put buyers off, to low, and you won’t reap the benefit of your years of hard work. It’s essential to have an in-depth understanding of the business being sold, know its market inside out, and have a detailed evaluation of its growth potential. At CBHC we have access to cutting edge software which provides data on every published corporate finance deal in the world, as well as industry-leading market research. Using this data, combined with a detailed analysis of the profit and loss, balance sheet, business forecast and goodwill valuation, we can help you to arrive at a realistic figure.
Tax considerations should be borne in mind at an early stage, because they might tip the balance from a deal that’s viable to one that’s not – structuring the deal in a tax efficient way is critical, so it’s best to consult a specialist tax advisor.
Once everything is in place and your business is ready to market, think about how potential buyers may be contacted. A public announcement isn’t advised, since it could create uncertainty amongst customers, suppliers and staff, so a direct yet discreet approach to potential purchasers is the best option – or you can ask a corporate finance advisor to do this for you.
Make sure you choose one who knows your industry and type of business well, as this will ensure you receive genuine interest, and the sort of price offers you are looking to achieve. This is something we at CBHC can help with, as we have access to a network of investors, as well as information on every company in the UK and Northern Ireland. This allows us to create tailored target listings in order to approach potential purchasers, in confidence, on your behalf.
Agreeing the terms and reaching completion is often the most stressful stage of selling a business, since so much time and energy has already been expended on making the deal work – especially since it can be difficult to gain perspective, especially if your company has been your life’s work. It’s because of this that we always suggest both buyer and vendor use third parties to negotiate price, exit terms, staff retention and profitability targets, as well as to manage due diligence – of course, these are also areas that CBHC is well placed to handle.
For more information and advice on developing an effective business plan, please contact our Corporate Finance Team on 01245 495 588.