Selling a business
Selling your business whether that is a hotel, guest house, restaurant, pub or something else is an exciting time but one that you need to prepare for to ensure that you maximise both the chances and the price of a sale.
A little information follows but be aware that all business sales are different so it's crucial that you get the advice specifically relevant to yours from the off.
Planning & Timescales
Do not underestimate the time it may take to sell your business. Dependent on the type of business you are selling, 18 months to 3 years is much more likely than finding a buyer within a few months which is why it is really important to plan ahead.
Ways to sell your business
You should be aware that there are many different ways in which you can potentially sell your business and it is important that you get advice prior to doing so, as the tax consequences can vary dependent on the makeup of the sale.
Business Profitability
The focus of the majority of potential buyers is profitability so recent profit levels need to be as high as possible. It is much easier to sell actual profits rather than potential profits. Is the business currently trading to its full potential? Is it possible to increase your level of turnover and/or reduce your business costs?
Management / Staff
Can the business operate without you? The less work you have to do in the business at the point of sale, the more attractive proposition it will look to buyers. It's also important to keep any staff records up to date maintaining up to date contracts of employment and job descriptions.
Financials
You should be maintaining up to date financials regardless, but it is even more important to do so in the lead up to a potential sale. A quick turnaround on formal accounts is expected and keeping financial records up to date is vital as management accounts are more than likely to be requested.
Marketing
Having a clear system of marketing that can be turned up or turned down as required is beneficial to a sale. In terms of marketing materials, it is important that you separate you as a business owner from any marketing (domain name / photos / videos etc) prior to any business sale.
Advisers
It's important that you have professionals who know your field (accountant/solicitor/estate agent) in place prior to any potential sale.
Potential Buyers
Depending on the type of business you are selling, you may need to consider who you are looking to sell the business to. Have you thought about selling to your current management team or your employees? Have you got any growing competitors that might be interested in your business? Or does your business need marketed by a specialist agent?
Selling Process
The process of selling a business isn't quite as straight forward as finding a buyer and agreeing a price. If only it was that simple! The first document will ordinarily be the Heads of Terms which is effectively a detailed sales agreement so that there are no surprises for either side of the transaction after the day of sale. Then will come the Due Diligence process, providing genuine information about the business to the potential buyer, which is not always straight forward and often a tedious exercise for the seller. The time frame from agreeing a price with a buyer to the point of sale is invariably months rather than weeks.
Ensuring that the business is setup in the most tax efficient manner for a sale can potentially give you thousands of pounds of tax relief and we have specialists at Dodd & Co that can help you with all the aspects of planning involved in selling your business ensuring you get the best possible financial result.
By Stuart Bell (Partner)
