Selling a business is a significant decision, one that requires thorough preparation and careful consideration to make sure that the outcome is both successful and profitable for you. We’ve created 6 key areas that you will need to focus on as you prepare to sell your business:
1. Get your financials in order
Often the first thing a potential buyer will ask is to understand your finances better. That may mean reviewing your accounts, Companies House filings, projections and forecast and your costs and liabilities. So first things first, ensure that your accounts are up-to-date and accurately reflect the financial health of your business. This includes:
- Profit and loss statements: Provide your buyer with a clear picture of your revenue lines, expenses and profitability.
- Balance sheets: Show the financial position of your business which should include any assets owned by the business, liabilities and equity.
- Cash flow statements: Demonstrate how cash flows in and out of your business. Contractual agreements and obligations go a long way in verifying this aspect of your finances.
2. Boost your business’s appeal
If you’ve done the leg work in advance to streamline and diversify your business, this is really attractive to potential buyers. You can do this in several ways:
- Streamline your operations: Make sure your business processes are efficient and well-documented.
- Diversify your revenue streams: Reduce dependence on a single customer or product line. Show seasonal impacts and how these are offset with other revenue streams if applicable.
- Invest in marketing: Strengthen your brand presence and customer loyalty. Show potential buys which channels and approaches are successful and how you’ve built customer/brand connection.
3. Understand your business’s value
An essential step before entering into any conversations with buyers is this, know what your business is worth. Engaging with your accountant (if they provide this service), or finding one that specialises in this area is critical. They’ll assess your business a few ways to determine the value:
- Analysing financial performance: Reviewing historical financial data and future projections.
- Assessing market position: Considering your business’s competitive advantage and market share.
- Identifying intangible assets: Valuing non-physical assets like brand reputation and intellectual property.
4. Prepare legal documentation
Ahead of any conversation with a potential buyer, you’ll need to make sure your legal ducks are in a row. Look out for:
- Contracts and agreements: Review all contracts with suppliers, customers and employees. Make sure these are up to date and reflect any revenue or cost lines you’re highlighting in your forecasts. If these contracts are for a fixed terms that’s due to be renewed in the next 12 months, consider approaching them now to renegotiate and secure the agreement.
- Intellectual property: All businesses have IP so make sure your brand is appropriately protected with trademarks, copyrights and where appropriate, patents.
- Licenses and permits: If your business relies on licenses and permits to operate, review these to ensure they’re accurate and valid.
- NDA’s: Finally, but most importantly, before you share any information with a buyer, put an NDA (non disclosure agreement) in place with them. This protects you should the sale not go ahead.
5. Plan for due diligence
Due diligence is a thorough review of your business conducted by potential buyers and sometimes their assigned accountant or auditor. You can get ahead of this requirement by being organised with the following:
- Operational information: The nuts and bolts of how your business operates. Including your business plans, employee manuals, and operational procedures.
- Financial records: we’ve already covered this but keeping all up to date records in a single data room will help you to stay organised.
- Legal records: Documentation of any legal issues, litigation history, and compliance.
- Tax records: Complete and accurate tax filings, each out to your accountant for help with these.
6. Consult professionals
Preparing to sell your business involves a lot of preparation and you may not know all of the answers or have all of the information to hand. Ease the stress and take confidence by engaging with professionals such as business brokers, accountants, and legal advisors to guide you through the process and maximise your business’s value.
Are you considering selling your business?
Ready to sell your business? Get in touch with us at Jamieson Law today for expert advice and support. We specialise in the buying and selling of businesses and so one of our team will help you navigate every step of the process.
Call us now at 03308 184 218 or complete the Contact Us form here and we’ll get in touch with you.
