Preparing your Business for Sale
At this time of year, it’s common for business owners to take stock and reflect on their future goals. These might include:
How could I improve trading performance?
When do I want to retire?
Do I have a succession plan or an exit strategy?
Planning for the future is key in any business and if the ultimate goal is to exit the business, a clear step-plan is required to ensure that maximum value is achieved with the minimum of stress.
Key Steps to Consider
Grooming your business for sale is a crucial process that can significantly enhance the value achieved and reduce the complexity of the sale process.
Engaging a Corporate Finance (‘CF’) adviser like Keenan CF at the early stages of considering an exit can prove invaluable. Here are some key steps that I would recommend:
Optimise Financial Performance
Ask your CF adviser to analyse performance trends and provide recommendations for improvement. A fresh pair of eyes to critically appraise the business will provide additional perspective.
Have your internal or external Accountant tidy up your financial statements and ensure that they accurately reflect performance. Any exceptional or non-recurring items will be adjusted for by your CF adviser when they value the business, so these should be highlighted.
Enhance Operational Efficiency
Streamline operations where possible to demonstrate efficiency and maximise profitability. The cash profit that your business generates will be a key driver of value.
A business with a strong management team that can operate independently of the owner will prove more attractive to some Buyers.
Re-evaluate your plans for any additional expenditure on marketing, new machinery etc in the lead up to a sale process. If it isn’t going to make money and enhance value in the short term, considering putting it on hold.
Critique your Business as a Buyer would
Your CF adviser should review your business from a Buyer’s perspective to flag potential issues early on and provide cost-effective solutions.
Ensure all of the necessary legal agreements and consents are in place. For example, do you have formal agreements in place with your key customers and suppliers? Do all employees have formal written contracts? Do all business premises have valid Energy Performance Certificates? Is the business GDPR-compliant?
Consider if you want to remain with the business for a period post-sale, or if you’d prefer to exit immediately. Many Buyers welcome a handover period. Your CF adviser can assist in preparing a Business Continuity Plan to give interested parties confidence that it will be “business as usual” after the sale completes.
Plan for Tax to Maximise your Reward
You will have worked hard to grow the business to a level that it is attractive to Buyers - engage tax specialists to develop a tax strategy to minimise the tax liabilities and maximise the proceeds you will receive after the sale.
Engage your Team of Experts
Unless you are a serial entrepreneur, you might only do this once, so make it count - build a team of experts to support you through the transaction phase. When the business is ready to be sold, your CF adviser will talk you through the process and manage the transaction from start to finish. Your internal or external Accountant will be instructed to assist you to prepare Management Accounts for the year to date, so a Buyer has an up-to-date picture of financial performance. Corporate Solicitors will be engaged to prepare the sale contract and protect you from unreasonable future claims from the Buyer. Like Corporate Finance advisers, Corporate Solicitors specialise in the sale of businesses and will guide you through the legal process.
Conclusion
By engaging a Corporate Finance adviser from the outset and by following a clear step plan, you can prepare your business for sale and make it more attractive to potential buyers, which should ultimately maximise value for you.
If you are considering the future of your business and would like to discuss any of these topics confidentially and free of charge, please drop me a message on LinkedIn or contact me as follows:
Email: cfleming@keenancf.com
Phone: 028 9089 0966