How to prepare your business for sale
While it can be possible to sell your business in a few months, if you start preparing around two to three years before you sell, you set yourself up to achieve your price and objectives.
Define your objectives
On that note, the first thing to do is really get to grips with your objectives. Of course the sale price will be a part of that and it’s worth thinking how much money you want and need to make from the sale.
But defining your objectives goes much deeper than that. Think about:
· Will your employees stay on in the business?
· Who is the ideal buyer and why?
· How much involvement do you want post-sale? Will you retire and step away completely? Or stay on as a consultant for a couple of years?
The answers to these questions will create your strategy and sharpen your preparations.
Value the business
Get a professional broker or accountant to value your business. You will need to know a benchmark figure for your business at the outset. But the other major benefit to getting a valuation early on, is that it can highlight any areas that could be improved before the sale process begins. If you can rectify those areas, then you stand a better chance of getting a higher sale price.
In many organisations, the owner is pivotal to the success of the business. If you are the key person in the business and you’re leaving after the sale, your business may be less attractive to potential buyers.
But you can retain the value of the business even after you’re gone if you have a clear succession plan in place. Make sure you’re training up your management team and impart your knowledge sensibly before you leave.
Don’t forget that some employees may want to leave the business when they learn of the sale. Make sure that you have restrictive covenants in place for your key employees so that they can’t immediately set up on competition, which can impact negatively on the value of your business.
Get your documents in order
Remember that a potential buyer is going to pore over all of your documents in their due diligence to find out everything they can about the business. They will be looking for any red flags, or concerns that might reduce the price of the business or even compromise the sale altogether.
So make sure your documents are up-to-date and in good order, particularly your financial documents. Ask your accountant to do a thorough review and highlight any areas of concern.
Resolve outstanding disagreements
One of those areas that can devalue a business is any sign of disagreements with your customers, suppliers or third parties. In a similar vein to selling a house and disclosing any disagreements with your neighbours, you will have to tell a potential buyer about ongoing and pending litigation.
Try to settle your disputes if you’re thinking about selling. If you have a major trial looming, wait until the outcome is decided before you start marketing the business for sale.
Own and protect your IP
Your intellectual property may be one of the most valuable assets of the business. Are there any materials, inventions, designs, wordings, trade secrets that are exclusively yours that you haven’t yet protected? We encourage you to do an audit of all those intangible assets that you own, but have not yet applied for copyright, patent or trademark to get the most value out of your business on sale.
Getting your business ready for sale is an exciting time, and the steps you need to take will vary depending on your objectives. To speak to an experienced solicitor about how you can prepare, please get in touch with us at HooperHyde.