Getting ready to sell your business
Whether or not you are starting to think about retirement, if you have any plans to sell your business in the future then there are steps that you can take to ensure that you achieve the best price for your business and to sell it on the most favourable terms. It is worth investing time and effort to ensure that your business is presented as attractively as possible before you start to market it to potential purchasers.
Keith Hardington, commercial Solicitor, in the Business Team at Walker Foster, Skipton, explains that ‘Putting your business in good order before you offer it for sale will prevent delays and will reduce the scope for negotiation by the purchaser during the acquisition.’
Identify and address any issues and inefficiencies
At an early stage, you should conduct a wholesale review of your business’s internal and external affairs to ascertain whether there are any matters that could affect its attractiveness to potential purchasers. This is an extremely important exercise which requires you to try to look at your business from an outsider’s perspective.
Consider whether there are any adjustments that can be made that might make your business more attractive. Some businesses operate in a particularly niche market, so it is worth considering at an early stage due diligence to identify any potential problems selling to a third party.
It can be hard to be impartial about something that you have invested so much time in, and it might be worth employing the services of an external consultant to help you in this regard.
Protecting your assets
An area of interest to any potential purchaser will be the assets of the business, whether physical premises and equipment, intellectual property, trade secrets and your key personnel. You may need to take steps to protect assets and tie in key people with performance incentives.
It may be that you only wish to sell some of the assets of the business, in which case your solicitor will be able to help you with restructuring. Whatever the value that you hope to realise, there are likely to be tax liabilities which can be mitigated if you plan well in advance.
Get your house in order
Your ability to show and demonstrate that your books are in order is of vital importance, that there are no discrepancies, and that your business’s financial health is evident from them. A disorganised set of accounts can reflect deeper financial problems.
Alongside past performance, a purchaser will want confirmation that the future business pipeline is healthy. They will want to review your commercial agreements – the way your business makes money. Your solicitor can help make sure that contractual documentation is up to date, relevant, and fit for purpose.
Throughout the life of your business, you will have entered numerous other agreements which determine the costs of the business. For example, with contractors, suppliers and your staff members. You will have internal policies, a lease or licence of premises, agreements with web hosting and data storage arrangements, insurance, accountants etc. All such agreements need to be readily available and up to date.
Your internal processes and procedures may also need to be revisited to ascertain whether cost savings can be made and whether they remain up to date with the law and industry standards.
Resolve any disputes
If you are embroiled in any disputes with customers, suppliers or staff, then these will need to be dealt with and resolved as soon as possible.
All these steps will take time, so the earlier you get your solicitor involved, the sooner we can identify issues that might be used by the other side to reduce the price they are willing to pay.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.