- Financial Documents.
Make sure that your financial documents are up-to-date and as accurate as possible. Inaccuracies may eventually become apparent to a buyer and may land you in hot water. Even if the books show poor figures, some buyers will be attracted to the potential in growing the business. Nevertheless, try to make your accounts as strong as possible – clean up the balance sheet and improve efficiencies.
- Do not attempt to sell the business yourself.
In order to carry out the sale properly and thoroughly, enlist the help of solicitors and accountants. Buyers can take advantage of sellers acting alone and, in any event, you want to ensure you protect yourself throughout the sale process.
- Value your business before negotiations begin.
Starting the potential sale process with buyers when the price is pitched at the wrong level will make it nearly impossible to increase the sale price later down the line. Engaging accountants early on will place you in a knowledgeable position going forward.
- Ensure you are realistic about the sale price.
Smaller business owners often subjectively value their business at inflated prices as a result of the personal time and effort they have put into their business. This ties in with the point above – make use of professional assistance.
Keep the business sale confidential from parties such as employees, customers and suppliers. This will prevent issues arising, for example, negative attitudes from employees concerned about management and ethos changing.
- Outstanding Problems
Make sure that any outstanding problems in the business are tied up prior to entering the sale process. For example, if you are experiencing difficulties with a certain customer, try to resolve the issues prior to disclosing and discussing customer contracts with potential buyers.
- Expect to answer a lot of questions.
Buyers will have professional assistance – just like you should. Their solicitors and accountants will want to protect them just as much as your advisors want to protect you. Expect in-depth queries – referred to as ‘due diligence’ – on topics such as financial accounts and be prepared to provide detailed answers.
- Develop an idea of your preferred type of buyer.
If you are a HGV company trading in the south-west of England, you may want to focus on buyers in the same area with similar business values. On the other hand, you may be happy for your business to be sold to a buyer from the Outer Hebrides. Whichever option you choose, try to form a vision of how you want the business to exist going forward. When the sale completes, you can leave the business with the confidence it’s in good hands.
- Make yourself redundant.
You need to remember you’re selling the business – not yourself. You should present a strong management team who will be able to carry the business forward long after you have left. Ask yourself this question: If I go on holiday for a month, can the business run on its own?
- Get a non-disclosure agreement (also known as a confidentiality agreement) in place.
This ensures that potential buyers are prohibited from disclosing your trade secrets to third parties (save for their professional advisors) during any initial negotiations. It will also prevent them from exiting negotiations, not buying the business, then sharing the business information regardless.
- TUPE transfer.
Individuals working in the business may transfer over (by way of TUPE transfer) to the buyer – make sure you get an employment lawyer involved in addition to any company commercial lawyer. There will be certain processes to go through and boxes to tick in order to comply with the TUPE Regulations.
- Ensure your employment contracts and handbooks are up-to-date.
This can help provide for a smooth transition from pre-completion to post-completion and it will give any buyers confidence that employment legalities are as watertight as possible.
- Make sure your terms and conditions are current.
Potential buyers will want to know the terms on which the business trades and the recourse available when customers/suppliers fail to adhere to the terms.
- One word: property!
Is there any property connected to the business in the form of buildings or land? If so, make sure you consider the effect the business sale will have on this. Do you own or lease the property? Will the property be sold with the business? Or will the buyer lease the property from yourself or a third-party landlord? Enlist the help of professionals in carrying out any property transactions which run alongside the business sale.