Selling a business is often the culmination of years of hard work. To ensure a successful sale, maximum return and a smooth transition, preparation is key.
With proper planning and sound management in place, you can make your business an attractive opportunity for potential purchasers. There are several ways that you can help prepare your business for a successful sale and here are some of our recommendations.
Ensure ‘Housekeeping’ is in Order
One of the most important aspects of selling a business is to ensure that all of your books, records and important contracts are up to date and in good order. Any prospective purchaser will want to undertake a thorough legal and financial due diligence exercise on the business in order to assess its assets and liabilities and consider its value and commercial potential.
If such information is easily accessible, accurate and complete it will make for a smoother and no doubt shorter sale process and will instill confidence in any potential purchasers.
Audit of Current Systems, Policy and Procedure
Take the opportunity to carry out a review of internal systems, policies and your own terms of business and/or contracts of employment. It is better to identify any areas for improvement or spot any potential issues in advance of any sale process so they can be rectified prior to sale. That then means you can spend more time concentrating on the process itself, rather than expending valuable energy and management time fixing historic issues.
Protect what is yours by ensuring business intellectual property is properly protected and owned by the business and that key employees have signed contracts with suitable notice provisions and restrictive covenants. Check you are up to date and compliant with regulations and recent legislation, for example, relating to data protection and pensions.
Good practice also dictates that you try to remove trivial costs and expenses or financial items not directly relating to operating the business, as much as possible. This will not only boost your profit margins, making the business more attractive in the eyes of potential buyers, but will also demonstrate that the business is well managed. If the period running up to the sale of the business showcases peak performance, then you are likely to get a more positive return. Common issues to look out for can include salaries for non working family members, mileage claims, benefits in kind as well as cars and other discretionary expenses. If there are items that a purchaser would not want to pay for, it is probably worth removing!
First Impressions Count
Try and see your business through the eyes of a potential purchaser. Consider sprucing up your business and making those small but noticeable improvements that have been put on the back burner.
Simple steps such as ensuring your website content and social media presence are fresh, relevant and professional can all go a long way in securing a good first impression.
Your management structure is key to the successful continuation of the business after the sale, so having a good management team in place will be important to any prospective purchaser, especially if owners are considering exiting as part of the sale. Is the team in a shape to allow growth? Is there an over-reliance on the owners? Consider expanding management and putting in place a succession plan to reassure any potential purchaser that there is experience and knowledge in place to ensure day to day running of the business.
Create a Growth Plan
When purchasing a business, a purchaser will want to explore several key areas. How much profit does the business currently make? Is the business structure sound? What is the potential for the business moving forward?
The last point can be one of the most important aspects of selling a business. Anyone looking to buy will want to understand growth opportunities and future potential in the market, in terms of product or services offered, or even something as simple as a more comprehensive marketing and sales strategy. Keep your eye on competitors in the marketplace and ensure you regularly keep a check on industry developments and trends.
In some areas, you may wish to implement some of the findings before beginning the sale process as this will allow you to showcase the potential effectiveness of your growth plan moving forward.
Determine the Value
An independent third party who has specialist industry knowledge should be used to determine the value of your business. They can take into account your objectives for the sale and will investigate the market and consider recent sales of similar businesses. Your accountant can provide initial guidance in this area and they will usually be your first point of contact in terms of valuation, though specialist corporate finance advice may also be sought.
You should try and engage a trusted team of advisors as early on in the process as possible who can work alongside you and assist with the sale process. Accountants, lawyers and potentially corporate finance experts may form part of your core team and the earlier you take advice from them then the more likely it will be that you achieve the value your business deserves.
The team here at Pannone Corporate have a wealth of experience advising sellers of businesses and can assist with any questions you may have. Call our team now on 0800 131 3355 for a confidential discussion of your circumstances. Or fill out the contact form for more information.