The PM+M corporate finance team speak to many business owners who open their conversations with questions like ‘What is my business worth?’, ‘How long will it take to sell?’, ‘What is the sale process?’, and many more.
There are many variables involved in valuing and selling a business, from sustainable performance, trading history, future opportunity, and company structure, to personal circumstances such as the reason for sale, retirement plans, desired timeframe, acceptable deal structure, plus much more.
At PM+M, we take to time to understand you, your business and your future goals and objectives to ensure we can support you in achieving the outcome you require. In our latest blog, we highlight the five questions we are commonly asked when speaking to people interested in the possibility of selling their business.
1. Is selling the right option?
It’s important to remember that the decision to sell your business is a significant one, and there’s no one-size-fits-all answer. Take the time to thoroughly assess your situation, gather information, and consider the potential implications before making a choice.
Reflect on your motives for selling, and what your alternatives may be.
Whatever your reasons, you should keep your end goal in mind at every step. Whether you have a minimum necessary consideration or a deadline you want to exit by, these objectives will make the process more focused. You should be prepared for the deal to take six to nine months at least, so getting prepared early will be crucial to reaching your goals.
2. When is the best time to sell?
Deciding to sell a business is an extremely personal decision and the factors at play will differ from person to person. Determining the best time to sell your business involves a combination of internal and external factors. While there’s no one-size-fits-all answer, some factors to consider are:
- Financial performance: Selling when your business is experiencing strong revenue and profit growth can make it more attractive to potential buyers and increase its valuation. Buyers prefer businesses with a history of consistent financial performance, so consider selling when your business has a track record of stable earnings.
- Industry and market conditions: Assess whether there’s a demand for businesses like yours in the market. Selling when demand is high can attract more buyers.
- Personal and lifestyle goals: Consider your own readiness to sell. Are you looking to retire, start a new venture, or make a lifestyle change?
- Tax implications: Consult with a tax adviser to understand the tax implications of the sale. It is crucial to understand net as well as gross proceeds.
Ultimately, the best time to sell will depend on a combination of these factors, as well as your individual circumstances and goals. It’s important to consult with professionals to get a comprehensive understanding of the current market conditions and the potential impact on your business’s value.
3. How do I know how much my business is worth?
Business owners often want to understand the fair market value of their business before selling. This involves assessing the company’s financials, assets, liabilities, growth prospects, industry trends, and recent comparable sales. A professional adviser can help ensure a more credible valuation that takes into account all relevant factors.
4. What should I do to prepare for the sale process?
Preparing your business for the sale process is crucial to maximise its value, attract qualified buyers, and ensure a smooth transition. Consider the following:
Financial preparation: Ensure your financial records are accurate, up-to-date, and well-organised. Consider the preparation of detailed management accounts and provide detailed financial projections that showcase the business’s potential for growth and profitability. Address any unresolved financial issues, discrepancies, or liabilities that could deter potential buyers.
Systems and controls: make sure all systems are transparent and easily accessed. Consider whether further management information systems or financial controls should be introduced. Also create detailed documentation of key business processes, workflows, and operating procedures to demonstrate that the business can operate smoothly without your direct involvement.
Key contracts: review all material contracts and ensure they are available for the due diligence process.
Management and employees: plan for your departure from the business with a succession plan. It is important that the management team are prepared to continue after the sale. This will help ensure a smooth transition and help give potential purchasers reassurance.
Remember that the preparation process can take time, so it’s advisable to start early. Thorough preparation increases the likelihood of a successful sale and a positive transition for both you and the new owner.
5. Should I seek advisers to assist with the sale?
Selling a business is a complex process that involves legal, financial, and strategic considerations. Professional advisers can provide valuable expertise, guidance, and support to ensure that the sale goes smoothly and that you achieve the best possible outcome.
They can advise on the valuation of the company, compile an information memorandum for potential investors, assist with facilitating due diligence information, shape the transaction and maintain value protection throughout the process. Taking tax advice is also fundamental to ensure that the sale is structured in the best possible way.
Be sure to select advisers you trust, and that you will have a good working relationship with. Remember that each business is unique, and your needs may vary based on the size of your business, the industry you’re in, and your personal circumstances. The expertise of these advisers can significantly enhance your chances of a successful sale and a smooth transition. It’s important to carefully choose advisers with relevant experience and a proven track record in business sales.
There are many aspects to consider when thinking about selling a business. Early planning is essential to ensure you achieve the best sale price, minimise risks and optimise your tax position. Our advice is to engage with experienced professionals from the outset who will guide you through the sale process, from valuation through to negotiation and due diligence, providing invaluable insights on how to achieve a successful sale and ultimately helping you realise your future objectives.
Working collaboratively with our accounting, tax and financial planning specialists, the PM+M corporate finance team have capabilities to provide services for the whole business life cycle ensuring the desired outcomes are achieved.
If you are thinking about selling your business, want to know how much your business is worth, want to discuss your specific situation in more detail, or anything else corporate finance related, please get in touch by emailing: ryan.bilsborough@pmm.co.uk.
