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Grooming a Business for Sale
Karen Edwards is the Head of our Corporate & Commercial Team.
In her latest in a series of articles on selling a business, she offers her advice on grooming a business for sale.
If you want an overview of the process when selling a business, you can read Karen’s guide to selling a business here.
How to get value when selling a business
Building a business into a successful enterprise is often the culmination of years of hard work, so when it comes to the time to sell, you want to be sure that the business is an attractive prospect for any buyer to allow you to realise the maximum value. This article focusses on just some of the ways to get those business affairs in order.
What to consider when selling a business
Show a stable financial pattern
Try to show a stable financial pattern through the year so that the figures look good. Better still, maximise the trading success as much as possible, ideally by aiming for a year-on-year increase in profits. You could improve your working capital position by good stock management and tighter credit control and consider selling any under-used equipment or property.
Get your accounts in order
Make sure accounts are in order, up to date and give a true picture of the business. It is vital that accounts are accurate. Be realistic when using depreciation figures or the timing of income in your accounts. Provisions for bad debt and old stock should also be realistic.
Expand your range of customers
Look to expand your range of customers and suppliers. Over-reliance on a few key customers or a single source of supply could undermine your business’ value. Aim to tie key customers, suppliers, staff and managers to long-term contracts to give the buyer comfort that these will not be lost following any takeover.
Get buy in from key staff
In the same way, establish sensible incentive schemes to encourage key employees to remain with the business after your exit. Depending on the type of business, it may be that there is no business without certain individuals. If possible, consult with them at an early stage to gain their trust in the sale.
Ensure you have complied with all legislation
Check that you, or the company, has complied with legislation, for example employment, health and safety, GDPR, to name a few. Ensure that all of the necessary licences and consents which should be in place for the type of business being run, are. In the same way, check that all necessary insurances are in place and that they provide adequate cover.
Ensure your books are up to date
If the business is operated by a corporate entity and it is that corporate entity’s shares which are being disposed of, make sure that the statutory company books are up to date. In addition, any filing history held at Companies House must be up to date and correct. The buyer’s advisers will check that any company records are accurate and any incomplete filing history for example, can lead to delay in the sales process and costly rectification work for the seller.
Tax when selling a business
Make sure that all tax has been paid as and when it should have been. This is certainly not something that the buyer will want to take any risk on, and a seller will be asked to provide indemnities regarding tax in any sale contract.
Iron out any legal issues
Iron out any major issues, for example employee grievances or claims, or litigation. Again, this will make the business less risky from the buyer’s point of view.
Check your lease
If operating from rented premises, ensure that there is a formal lease in place so that the buyer has the comfort of knowing there is security of tenure. Goodwill is often associated to location so this is another reason to make sure occupation is secured. If a lease is due to expire soon, make sure the landlord will agree to granting new one, preferably in writing.
Present your assets well
Present assets in good condition and make sure that any premises and equipment has been well maintained. Any stock should be well looked after and in good order. All of these things will instil confidence in the buyer.
Intellectual property rights
Protect any intellectual property rights. The business trademark could hold significant value so it is crucial that this is registered with the Intellectual Property Office to prevent others from using it, or worse still, registering it before you do.
Take advice
Take advice. Speak to your accountant and any others who may be able to assist with actioning the above. There are many ways to make a business shine, so it is always worth discussing with the relevant professionals.
Management Information Systems
Finally, make sure management information systems are working smoothly. It is likely that a prospective buyer will want initial information prior to any formal due diligence process, and they will no doubt want this information quickly. This is an opportunity to show that the business is under control. Ensure any information you do give is accurate; a buyer’s confidence will be undermined by any errors.
Selling a business: a solicitor’s advice
In short, get your ducks in a row. Earlier planning will pay off by making the process of selling less stressful and ultimately allowing you to gain the best possible price for your business.
Selling a business is often the culmination of many years of hard work nurturing and growing that business. Plan well and prepare the business for sale. Pick the right time to exit by considering the market and ensuring you will have the time to devote to the process. Choose a solicitor who specialises in business sales so that you get the right advice.
Specialist business sale solicitors in Bournemouth, Christchurch and the New Forest
Our Corporate and Commercial Teams are happy to discuss any issues that this raises for you and we offer a free initial meeting or chat on the phone.
If you have any questions, you only have to ask us at Frettens. Please contact us here or call 01202 499255 and Karen or a member of the team will be happy to chat about your situation and your particular requirements.
Related articles on selling a business:
You can read Karen’s other articles on selling a business by following the links below:
Selling Shares back to a company
