Selling a business
Deciding to sell a business is often a big step. During the sales process, every seller wants to ensure that the sales goes through in the best way possible and that returns are maximised.
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This is our guide to selling a business, which will cover the things to consider during the sales process, the things to look out for, and when to turn to professionals for advice.
What to consider when selling a business
The first step is to get all your financial and legal paperwork in order to save a lot of time later on. This creates a more ‘watertight’ case for facts and figures, making it harder for potential buyers to knock you down or play hardball. Momentum is everything when it comes to negotiating price and you need to do so from a position of power, which typically translates to knowing exactly what your business is worth and why.
You might consider having a valuation meeting to help get an objective price for your business too; it’ll help to establish a fair market price that you can aim for during the sales process.
Our valuation teams are located in each of our offices across the UK, as well as across our European offices. This ensures we can provide local knowledge on an international scale, and respond effectively to widespread portfolio valuations as well as individual local projects.
Our valuation meeting can help to ensure not only a prompt sale but the best return for you.
Consult with your professional advisers
Professionally prepared material can mean a higher selling price for you, and a higher likelihood of finance (i.e. a mortgage or loan) for the buyer, resulting in a quicker deal for all parties.
Your accountant will help with key financial data such as trading accounts, certificate of turnover and whether to sell the asset or shares. Think about your tax position post-sale too. Make sure that the liabilities you’ll incur don’t make it impossible for you to sell the business.
Your solicitor can avoid later delays by preparing a draft contract of sale and covering off any ongoing legal issues that may need clarifying or resolving (e.g. planning permission).
Decide how to market your business
Open marketing lets everyone know in advance, attracts attention and maximises interest. It also stimulates more competition from potential buyers, which can push the price up.
It’s a more certain way of ensuring a sale – and often the best way to get the best price. We always aim to attract more than one bidder for a business; whether they be independents, multiple operators or corporates.
Closed marketing puts out feelers without arousing suspicion. Sometimes it is so confidential, potential purchasers are unaware of the opportunity. They may also question your commitment to sell. However, closed marketing is definitely a way of minimising disruption to the business if staff members and suppliers are unaware of your plans to sell.
Dealing with viewings
This is a key time for vendors. You need your agent to be a good supporter and "buffer" to take the pressure off.
You’re in the spotlight
You and your business are on show during the selling process. Don’t assume you can let your guard down when no viewers are expected. Serious buyers often act as ‘mystery shoppers’ to get a true picture of the business and it's operations.
Set aside plenty of time to show viewers around and really sell the business. Be welcoming and receptive. Make it a quiet part of your business day, if possible. You’re on show so look presentable and like you mean business.
Have books and records handy. Show the buyers the whole business – not forgetting that the living accommodation is an important part if applicable. Make sure both parts are clean, tidy and uncluttered. Take the opportunity to ask the viewer questions. Think what they might ask and prepare your responses ahead of the viewing if possible.
Talk about your successes. Sell your strengths. Recount examples of good business and customers, if applicable. Talk about the competition’s strengths and weaknesses.
Don’t be afraid to tell them about the challenges and the competition. Talk about your weaknesses as well as your strengths. It helps buyers to see room for improvement. The less that’s revealed later on, the more likely you are to sell at the price you agree.
Due diligence and negotiation
Do you have an interested buyer? That’s great news and only the start of the selling process. What comes next is arguably the most important part. Typically, buyers will offer below the asking price; this is the stage of negotiation where you’re able to make the case for why your business is worth a certain amount. A good negotiator will work to get you the best value for your business.
Get in touch with one of our advisers to assist you.
The valuation and the financials steps you’ve taken before, or had completed by a professional, will come in handy, ensuring that you’re negotiating from a position of power. You also want to consider any unique points from the buyer’s side, such as offering cash or the ability to move fast through the process. If you’re offered above asking price, which can be very exciting, find out why first to check that the buyer is serious and trustworthy.
Due diligence is the next step in the selling process, although it’s to be completed by the buyer’s side. It’s also usually the part of selling a business that takes the longest. Any buyer will want to carry out due diligence to guarantee that the business they’re purchasing is worth the agreed price. Due diligence can begin when both parties sign a ‘Heads of Terms’ agreement, which covers an agreed outline of the sale and protections in case either party backs out.
As a seller, it’s best to assume that the buyer will want to evaluate all aspects of your business. Prepare as much as you can in advance to foster a positive relationship with the buyer from the start and disclose all information to minimise delays. Thorough preparation from sellers at this stage usually translates to quick completion of the process.
The price is agreed - what happens next
Before you can bank the cheque, there are a lot of other checks to be done first. And they’re not straightforward as they involve people and paperwork. A good agent, however, will be able to assist with this part.
Your progression checklist
- Valuations and surveys need to be instructed (if not already done so), carried out and reviewed. Not the seller’s job but a potential time killer if things don’t get moving.
- Draft documentation required from the buyer’s solicitor to the seller’s solicitor. More red tape that needs to assume red alert status.
- Buyer’s solicitors need to raise any relevant enquiries. All solicitors, accountants and other relevant parties need to ‘buy into’ an agreed timetable.
- Ongoing dialogue and processing of relevant legalities and documentation ensues.
- Finance for the buyer of the business needs to be arranged and agreed, if not already done so.
- Final due diligence by the buyer’s accountants is carried out.
- As the seller, you will be expected to provide information for the buyer, such as a staff list, fixtures and fittings list, details of lease/HP items and stock value.
Closing the sale
This is the final stage of the business selling process. Once an offer has been negotiated, the deal completed, and the contract signed, a closing of the sale can be scheduled. It’s good practice to engage in a formal handover, introducing the buyer to any stakeholders and employees. This creates a positive final impression of the business selling process and minimises any future questions that may arise.
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Alternatively, you can download our guide to Selling your business here.