Key considerations when selling your business

Alistair Main, Head of Assurance at Duncan & Toplis

After years of building your business and creating a successful, sustainable and profitable enterprise, the time comes to sell. But how do you know you’ve covered all the bases to maximise its value?

Quite often, there is no room for sentiment in the world of business. When it comes to selling up, it is vital that you are in the best position to get the highest possible price and value from your sale.

Let’s explore the key points to look out for both before and during the process of selling your business.

Do your due diligence

Preparing a business for sale involves a number of considerations, particularly if you are looking to truly optimise the value of the sale. This process begins long before you have announced your intention to sell, as it is essential the business looks as attractive as possible to pique the interest of prospective buyers.

You can do this by preparing up-to-date accounts and settling any disputes, as well as organising all legal documents for the eventual handover.

One of the most important documents is the heads of terms, which sets out how a business transaction from the previous owner to the new owner will play out.

Though it is non-binding, it outlines all pre-agreed terms and conditions attached to the business sale, including whether the current owner intends to remain involved in the business for a specified period.

If, however, the current owner chooses not to stay on, it is essential to establish how key operational knowledge and insights will be transferred to the new owners to preserve the business’ maximum value. This document should only be drafted when sufficient financial advice has been taken, and the right buyer has been found.

Speaking to an accountant or financial adviser is essential to eliminate any concerns around missing information that may have been overlooked throughout the process. But above all else, read the small print of every transaction, contract

or negotiation to make sure the correct Ts are crossed and Is are dotted, in order to avoid a slip-up in the transaction that could disadvantage you in some way.

Get the sale structure right

There’s more than one way to crack an egg, and business transactions can take on a range of different forms, depending on your type of sale.

If you do not value your business at an accurate and reasonable amount, it will be difficult to bring someone to the negotiating table, let alone strike a deal with them. For this reason, accuracy needs to be a priority, but you must also have a minimum price you’re willing to drop down to.

It is important to know if your sale is an asset sale or a share sale, as both serve very different purposes. In an asset sale the buyer will purchase specific elements of the business, be it intellectual property or equipment, while a share sale will see you part ways with the shares you hold within a company and sell them to another party. This effectively hands over ownership and liability of the business to the buyer if you are the majority shareholder.

Identify the ideal buyer and pitch accordingly

If your business is successful, there may be a long queue of interested parties when you look to sell, but it isn’t always as easy as selling to the highest bidder. A successful sale may come from within the business. This may perhaps be someone or a consortium of people already working as board members or consultants, who could use loans or the profits of the company to fund a buyout. This would allow for a smooth transition to a party that is already aware of how the business operates, though it is not a luxury afforded to all business sales.

Other prospective buyers could be a large corporation in your field, or private equity investors who are active in acquisitions and have a proven track record. The larger an interested party is in stature or profitability, the easier it is to trace their previous deals and ensure your business is going into the right hands.

At Duncan & Toplis, we understand that selling your business is an important decision and we offer a range of services to create a smooth transition for you and your company.

To find out more about our services and how we can support your business, visit www.duncantoplis.co.uk.