Planning for a business sale
DURING the final years of the last decade, we witnessed financial turmoil on an unprecedented scale.
Confidence has been drained from the business world and some of our largest financial institutions have been close to failure.
During this period it has, naturally, been an extremely difficult climate in which to try to sell a business.
For the time being at least, the UK is officially out of recession, albeit marginally, and although it is still too early to suggest that we are over the worst it is not too early to plan for this possibility.
Business owners have been reluctant to consider a sale during the recession due to depressed prices and a lack of purchasers; however, now may be the time to begin planning again.
Getting your business ready for sale can take anything from a few months to several years and can have a significant impact on the price that you ultimately achieve. Why not, therefore, begin to consider some of the following?
n Management: How strong is your management team and can your business operate without you?
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A business which can be passed to new owners with the minimum of disruption is paramount. This is the number one issue that affects owner managed businesses looking to exit.
n Brand/Market position: Does the business have a strong brand name or is this something that can be strengthened in advance of a sale?
Knowledge of the market and where it is going in the future is vitally important – you should not rely on hearsay or second hand research.
n Financials: How strong are profits and the balance sheet? Is the business carrying out any unprofitable work?
Are there new, profitable markets which can be targeted? Are there any unnecessary expenses or personal expenses in the business?
In most cases, your business will be valued based upon its ability to generate cash. Whilst it may seem obvious, it is essential that profits are as strong as possible just prior to a sale.
n Tax: Make sure you discuss the tax implications of selling your business with your tax advisor straight away.
There are some significant tax savings available with some careful planning regarding the way in which you extract cash from the business and by ensuring that you meet the criteria for any available reliefs.
Getting these points actioned at an early stage, even if an actual exit from your business is still some way off, will certainly increase the likelihood of achieving a sale, and at the best price.