On 28 September, Hillier Hopkins and expert speakers from HCR Hewitsons and CapEQ will hold a special event that will explore and explain how to sell your business. The key, delegates will discover, is meticulous planning.
Founders and business owners will at some point in their career face the difficult decision of what to do with the business they have grown and nurtured. It may be that the next stage of growth is best approached via a sale to a larger organisation, or it may be time to retire and pass the reins to the next generation.
It is never an easy decision to make and one that needs planning and expert advice.
Before you sell, it is important to prepare the business for sale putting it in the best position to achieve both the best price and to enable a successful exit for yourself. That can take time, with advisers recommending owners and founders start planning at least two years before the eventual exit.
Every business will be different and depending on the type of business and the sector it is in, start by asking yourself is your business ready to be sold? Is the business ready for you to leave and is there a business that can carry on without you?
Understanding what you want to achieve from the sale is important too, so choose to work with professionals who can help you to achieve that. Do you, for example, want to walk away entirely, or continue to work with the acquiring business?
Get a professional valuation for your business by your accountant so you know what price you are likely to achieve and any additional terms which the buyer might ask for.
A buyer will be keen to ensure that the business they are buying is viable and has the ability to operate and grow independently of the founder. The strength of the team around you will be important, so consider how you can build a team who can continue to grow the business making it more attractive to potential buyers.
It may sound obvious, but first impressions last. Make sure any buildings you own are clean and tidy and if there are any minor repairs needed, fix them. Consider any alternative uses for premises, recognising that the acquiring business may not need an additional footprint. Carry out a stock take if relevant.
Due diligence
During the due diligence process every aspect of the business will be under scrutiny so make sure that you have good governance and processes and systems in place. Incorporation documents, share certificates, insurance, intellectual property rights, contracts with customers, employee contracts, leases, etc. will all be needed and up to date. Failure to pay attention to areas such as this may affect the buyer’s confidence in the business and force a lower valuation.
Your financial information is one of the most important aspects of the sale, so good quality and up to date information will enable a more accurate valuation and provide a snapshot into the running of the business. This includes historic turnover and profit figures, up to date asset valuations, full details of liabilities and debt, and the latest profit forecast. A clear pattern of data over a three- or five-year period will show how the business has been run under certain economic situations and being able to demonstrate profitability over a sustained period will increase the value of the business.
Buyers will also be keen to see where future revenue and growth opportunities will come from. Buyers will be looking to compare profit forecasts to real time data, and they will be more confident in the overall financial health of the business if this can be demonstrated.
How you manage working capital, debt and where increased efficiencies can be made will also add value to the business. Typically, debt items will be deducted from the overall price paid for the business.
A potential buyer will also be looking at how you manage risk. For example, if your business is overly reliant on a couple of customers or suppliers and where risk could be mitigated by negotiating better contract terms or supply contracts.
Don’t forget tax
A sale of a business will have tax implications for you, any other shareholders, and the business itself. It is vitally important to take advice in advance to structure the sale in a tax-efficient way so you do not pay more tax than you should.
To join Hillier Hopkins, HCR Hewitsons and CapEQ at this free event visit https://hillierhopkins.co.uk/events/the-business-sale-art-or-science/
