3 things to consider before selling your business

Are you thinking about selling your business? Make sure you’re prepared for the process. Let’s find out more.

In this article, we’ll show you three things you need to think about before you start selling your company or business. Selling a business can be a tricky process, but you’re more likely to avoid the pitfalls if you're well-prepared.

1 – Do you know what you’re getting into?

Selling up is a significant time in a business owner’s life. It should be the culmination of everything you have done in your business journey up to now, the moment when all the blood, sweat and tears become worthwhile. Ideally, you want to sell to someone who shares your values and will have the resources to take your business to a new level. Then, you can enjoy the fruits of your labour.

However, selling a business takes a lot of time, there’s a lot of work to do and it can be stressful, particularly if you have never sold a business before. It’s useful to understand this before you start.

2 – Have you got the right team behind you?

Selling a business can be daunting, but having a team of professional advisors in your corner can alleviate some of your worries. Often, sellers are reluctant to engage with professionals at the start of the process because they are worried about high fees. However, in most cases, having experts on board saves you money in the long run.

Here are four types of advisors you should engage with before you start selling your business.

1 – Accountant

It’s vital to get advice early from your accountant or tax advisor, so you understand the tax implications (positive and negative) of selling your business.

Your accountant will also help you decide how you will sell your business. Generally, there are two types of business sale:

·         Sale of company shares – This is where you sell the entire company (and not just a part of the business). This means  everything related to your company is sold, including any liabilities. As a result, a buyer will want to carry out more detailed investigations

·         Sale of business and assets  - You sell your business as a going concern and/or specific assets in your business, such as intellectual property, specific equipment or certain customer contracts. However, you will need to be mindful that there are additional procedures to consider, such as ensuring the correct transfer of employees, unlike in a share sale where employees continue to be employed by the same company and so there is no change or transfer

Finally, your accountant will help you place a realistic value on your business.

2 – Senior team

Selling a company can be a sensitive issue within that company, as it impacts everyone working in it. Therefore, it’s helpful to maintain a degree of confidentiality. Try to make sure the only people who know about what’s happening are those who need to know.

Put together a deal team of senior management who can help you with the process, such as negotiating with potential buyers and dealing with your other professional advisors.

3 – Broker

Do you have an interested buyer already for your business? If not, how do you plan to attract one?

You could spread the word in your industry. You could also hire a business or corporate broker to put your business out to the market and generate some interest.

4 – Legal advisors

Perhaps most importantly, there is a large amount of legal work required when selling a business. Here are some tasks your legal advisors will help with:

·         In the initial stages, it is important to put in place  heads of terms, confidentiality and exclusivity agreements – You need to protect your business’ position, as well as that of your potential buyers

·         Drafting and negotiating the contract to sell your business which is the main agreement together with all other legal documents that will be required

·         Assisting with the due diligence process and steering you thorough to the completion of the sale

It’s essential to get an expert legal team on board, a law firm with experience in selling businesses like yours. Think of them as your guide through the process, by your side from beginning to end.

3 – Get your house in order

Your potential buyers will go through a due diligence process to investigate the condition of the  company or business before they purchase it. They will examine every part of your business, looking for anything that could lead to issues after the sale, such as litigation or employee claims.

Before you start to sell your business, it’s a good idea to get your house in order, so that when you meet a potential buyer, they can carry out their due diligence quickly and easily. For example, are your accounts, statutory books and Companies House records up to date? Are any of your commercial contracts about to expire? What is the position regarding any properties and is intellectually property registered and protected?

Some internal housekeeping early on in the process could save you some headaches at the end and help make the process much smoother, minimising surprises along the way.

Find out more from Couchman Hanson

An expert legal team in your corner smooths the selling process, so you can enjoy the results of your hard work.

At Couchman Hanson, our solicitors genuinely care about getting the best outcome for you. We’re highly professional, with ‘city-level’ talent and experience, but also friendly and welcoming. Everything we do fits with our values of integrity, honesty and authenticity.

Call 01428 774756 or visit couchmanhanson.co.uk