How to sell a business – getting a business ‘sale ready’
When a business owner is looking how to sell a business, there are many components to consider. Selling a business is a crucial decision that many owners will make. They have invested a considerable amount of time, money, energy, and emotion into their business, so it is crucial to ensure that they get the maximum return on their investment.
There are a range of factors that can influence the price a buyer is willing to pay for a business. Therefore, it is essential to make sure that the business is “sale ready.”
It is never too early to start planning for the exit and implementing the necessary processes, people, and analysis in advance of a sale. This preparation will not only make the sale process smoother but also increase the value that the seller can achieve. There are also issues with personal inheritance tax and estate planning, where early preparation can reap real benefits.
Below are some guidance points to help ensure that your business is ‘sale ready’. Please contact Alexander & Co to discuss how we can assist and help to maximise your profits form a sale.
Tax planning
When selling your business, it is likely that the sale proceeds will be subject to tax.
However, implementing tax planning strategies can help minimise your tax liability. It is important not to delay addressing this matter, as certain opportunities may be missed if not dealt with prior to the sale.
At Alexander & Co we often restructure a business before its sale, to make sure the owner and any other key stakeholders tax liabilities are reduced as much as possible. This may also include retaining certain assets of the business, where this is beneficial to the seller.
Financial information requirements when selling a business
Having poor financial information can send the wrong message to buyers. It is paramount to have up-to-date financials which are of excellent quality. This makes it easier for buyers to value the business and rely on the financial results. Providing this information during the sale process will make it smoother and improve the buyer’s perception of the business, reducing the chance of challenges to the agreed sale price.
Can your business function without you?
Entrepreneurial businesses often rely heavily on their owners. However, a buyer will want to ensure that the business can operate without the seller. Having a dependable management team in place who can continue to drive success will make the business more attractive to buyers. This will potentially result in a higher sale price.
Profit trends when considering how to sell a business
Profit trends are a key factor in determining the value of a business to potential buyers. A business that demonstrates a consistent and growing profit pattern over time will be more valuable. It is crucial to understand the timing of selling your business. This includes considering its profit trends, future growth opportunities, and market dynamics.
Presenting your business’s potential for future growth and profitability to buyers will also increase its value. During the sale process, it is essential to perform well in comparison to forecasts. A strong financial performance during due diligence and negotiations will instil confidence in the prospective buyer.
Managing existing and anticipated risk
Managing the risks associated with your business, such as dependence on specific customers or suppliers, will enhance its resilience and reduce the risk profile in the eyes of buyers. While it may not always be possible to avoid customer or supplier concentration, efforts can be made to strengthen these relationships through extended contracts.
Effective management of cash, debt, and working capital is also crucial. Buyers will look for a business with a reasonable level of working capital. Understanding your business’s working capital cycle and implementing efficient working capital management strategies can add value during the sale process.
Typically, cash will be included in the headline sales price, whilst debt and other liabilities like corporation tax will be deducted.
Legal and financial obligations
It is crucial to ensure that your legal and financial reporting obligations are met to make a favourable impression on potential buyers. It is important to have all necessary documents in order, such as incorporation documents, share certificates, property leases, title deeds, intellectual property rights, employee contracts, and customer and supplier agreements. Keeping these items up to date and in place will alleviate the burden of addressing them during the sale process and will showcase your business governance in the most positive light.
How Alexander & Co can assist with advice on how to sell your business
Our team of experts is here to assist you throughout every step of the sale process. We are committed to working closely with you and can assist in achieving the following:
- Asist you in gaining a clear understanding of the value of your business and providing guidance on how to maximise its valuation.
- Assisting you in preparing your business for sale by gathering all necessary financial and other information, ensuring you are well-prepared for a potential buyer’s due diligence process.
- Identifying and addressing any potential tax exposure related to the transaction, both for you personally and for the business. Our goal is to ensure you have a clear understanding of your net proceeds from the deal and your tax liability is minimised wherever possible.
- Conducting a thorough analysis of your individual circumstances and the business itself to identify any tax reliefs that may help mitigate your tax exposure. We will also ensure that all potential tax liabilities are understood. we will provide you with a tailored tax plan as part of your overall strategy.
- Advising you on alternative deal structures that can enhance tax efficiency, when appropriate.
- Managing and obtaining any necessary clearances from HMRC on your behalf, as required.
- Informing you of your reporting requirements to HMRC, minimising any administrative burden and providing you with peace of mind.
Looking for advice on how to sell your business? – contact Alexander & Co
If you would like to discuss how our team at Alexander & Co can prepare your business for sale, please contact us. You can complete the form on this page or email us at info@alexander.co.uk We can provide strategies to reduce tax liabilities for the business and provide advice to achieve the best price. Additionally, we also advice the owners and key stakeholders to ensure a sale is structured in the most advantageous way to suit their requirements. This will help to minimise any liabilities which may arise.
