The time has to come to depart with your beloved business, whether your approaching retirement or ready to move onto your next venture, the process of selling your business will no doubt have its challenges and stumbling blocks.
In this blog we cover several things you should consider before you move forward with the sale of your business.
Timing is key
An important consideration, which is often overlooked, is the timing of the sale. From the time a business is placed on the market to close, sales on average can take around 6 to 12 months. There is always plenty of preparation involved before the business even hits the market, so it might not come as a surprise that a sale process can require a significant investment from you in time and money.
Whilst a quick sale may sometimes be necessary, if you can avoid a quick sale, best practice would be to observe the market in order to ensure it is the right time for the sale of your business. You should not wait until you must sell.
Valuation
When undergoing the process of selling your business, a valuation is crucial as it could change your strategy to selling. Putting a realistic price tag on your business such as not pricing too low or too high is also important, but the reality is that coming up with a realistic price can be difficult.
Legal advisors
Your advisors will be vital throughout the process of selling your business, they can help devise a plan for the sale, sort the necessary documents you need, and they can advise on any possible tax consequences.
What are potential buyers interested in
Potential buyers will be interested in several things when you’re pitching your business to them. Most importantly its value and financial prospects.
Potential buyers will also be interested in why you are selling, so it’s important to make this clear at the start.
A potential buyer will evaluate the corporate governance of the business. So, obtaining advice on this early on will put you in good stead for the process.
They may also want to undertake due diligence. This ensures you provide the buyer with relevant documents, such as your key contracts, license agreements, annual accounts, financial projections, and internal policies. Allowing your advisors to review these documents before you start the process, may save you a lot of time and money when you do find the right buyer.
Buyers are often interested in purchasing businesses because they own valuable intellectual property rights. If you own intellectual property rights:
- Do you own the IP right?
- Are you willing to sell all or some of your IP rights?
- Do you have a license agreement in place?
Buyers will be keen to see your contracts with your key suppliers, employees, and clients and so you should review these to make sure they are all up to date and clear.
Confidentiality throughout the process
Confidentiality during the sales process is something you should consider.
You do not want your competitors finding out about the sale as they may target your customers and suppliers.
You should consider if you require a non-disclosure agreement which ensures the parties do not disclose information to a third-party.
Finding a buyer
Finding a buyer may not necessarily be plain sailing and this step should be approached strategically.
Often the right buyer may not come along quickly and so in a situation where you are struggling you could engage a broker. A broker will help give your business market visibility where you want it, increase your chances of finding the best fit and even contact potential buyers on your behalf.
If you would like to discuss any of the issues raised in this article, click here.