Usually, a business is only valued when it goes on the market, which is a real shame. By then it’s often too late to address any potential issues.
No matter what the reason is for selling, it’s a major decision, so it needs to be lined up perfectly before any deals are done.
Moving on for the right reasons
Over the years we’ve come across loads of reasons why people decide to sell their business, but it all comes back to securing a brighter future. For some, the main driver may purely be based on the financials such as; taking the business as far as they can, releasing equity to fund other more profitable ventures, de-risk to release personal funds, secure investment from private equity to fund growth, a decline in profitability or even concerns about the industry. Whilst for others, it could be down to lifestyle like retirement, health, family or wanting to take on a different challenge.
But whatever the reason for selling your business, you’ll need to make sure you have everything in place to present your business in the best light – that’s where we come in…
Arm yourself with data
If you’re planning to sell your business in a few years, it’s definitely worth having it valued now. The valuation will give you a clear and realistic figure of what you’d achieve from a sale. Plus, if it’s fallen short of your expectation then we still have time to work on the business and achieve a better result. To maximise the value of your business, you can consider things like:
- Finding and implementing efficiencies – cost savings, processes and automation
- Organic growth – new markets, new territories
- Acquisition – buying an existing business to deliver growth.
The more insight that we have, the better!
Understanding the buyer
As there are numerous of reasons to sell a business, there are just as many reasons to acquire. Client Services Director, Tom Bostock, summarises this really well in his article ‘Growth by acquisition – the advantages’, which is definitely worth a read.
When considering potential buyers, it’s key to understand the best type for you and your business. Each buyer will have different characteristics and each come with pros and cons. Although on the face of it the highest bidder may seem the most attractive option, it’s often those with aligned values who are the best, especially if you’re retaining a stake in the business and aren’t exiting immediately.
The perfect buyer may also be right under your nose. If you have a high performing senior team in place, you may want to consider a management buyout. Likewise, you may identify a customer or supplier that would be ideal to drive the business forward.
Just as importantly, we’ll research the latest deal information – understanding who’s previously acquired in the sector and who might still be acquiring, so we have a solid list of potential suitors we can potentially start to court.
Timing is everything
Once both you and the business are ready, we’ll be in the perfect position to present your business for sale in the best possible light.
When we start to market your business, the aim is to positively engage buyers from the off, creating a “we must have it” mindset. So, before your business goes to market, an Information Memorandum (IM) will be created. This is your elevator pitch, shouting about everything that’s great about your business and why it would be a good investment.
Once we have the collateral ready to market your business, we’ll then start to connect with that list of suitors mentioned earlier. Don’t worry this isn’t like Tinder, we’ll only make discreet advances with senior decision makers and we’ll definitely be keeping your company’s identity under wraps until we have a signed Non-Disclosure Agreement (NDA) in place to ensure you’re protected. Initial conversations are pretty high-level, sharing just enough to get them interested and understand more about their drivers too, arming us with even more insight. We’ll then start to gauge their interest and share the IM with our shortlist of potential buyers.
Once a buyer is serious they’ll probably want to meet, but we’ll always ask for an indicative offer before this is set up so we know for sure it’s worth it.
Let the negotiations begin
This is where the fun starts. There’s lots to consider. As we mentioned before, price isn’t everything and you’ll need to weigh up a lot of factors. We’ll continue our research, so together, we understand any liabilities, assessing:
- Timescales – this needs to work for the business and shouldn’t be drawn out.
- Deal structure – how and when they’ll pay, will it be a one-off cash payment or a deferred payment?
- Tax issues – all tax implications must be fully understood. You may have capital gains tax to pay but there may also be other tax implications such as inheritance tax, but we’ll ensure you minimise your liability and claim any reliefs available to you.
Preparing for due diligence
Just as we will do all we can to protect you, a buyer will also want to understand any liabilities about your business which could have an impact on the deal. This is where all our preparation pays off, as we’ll have real-time financial data to hand when it’s requested.
This stage is crucial for both parties, as proper financial due diligence will help everything run smoothly throughout the sale.
Here for you at every stage
Selling your business is one of the biggest decisions you’ll ever make, so as your advisors we’ll hold your hand throughout, supporting you right the way to the completion of the sale and beyond. If a sale is on the cards and you’d like a little help, talk to your Client Services Director or email us at confidential@djhmittenclarke.co.uk to arrange a private call or meeting.
