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July 21st 2017 / BY: Wisteria

Preparing for a Business Sale

There may come a time when you decide to sell whole or part of your business and the reasons behind your decision can vary. You want to retire or the next generation are not interested in going into the family business. You may even contemplate selling part of your business for strategic purposes for example selling to get access to new markets or obtaining equity investment enabling the business to grow and add greater value to it.

Whatever the reason behind your decision to sell business owners should plan ahead before putting the ‘for sale’ sign up and inviting bids. If looking to sell in 5 years’ time for example then in the run up period one should ensure that the business is running efficiently as it can.

The importance of cost efficiencies

Focus on cost efficiencies and control and tidy up the balance sheet. So follow up on any old debts or sell any redundant assets. Working capital management is important as you don’t want cash tied up. Essentially you want to ensure that you are getting maximum value for your business when it comes to selling. It will only improve your position if efficiencies are brought in during the negotiating period.

Ensure that all financial and tax filings are up to date and be able to demonstrate a history that these have been filed on time. Reliance will be placed on the financial statements so have if they have been independently audited then this will add credibility to them.

By having a strong management team in place, the business should be able to continue trading once you are out of the picture. It is important to remember it is the business that you are selling not you and the business has to be able survive with you.

Review your client portfolio

Review your client portfolio, as clearly if the business is reliant on small number of customers then this will impact on the valuation, so ideally you should look to have broad customer base in place before you sell. Where there is a concentration on a small number of clients then a prospective buyer will want to see the strength of that relationship, for example copies of signed contracts. Remember the prospective purchaser wants certainty that customers will be retained.

Prepare a realistic forecasts and future cash flows of where you see the business going. Undoubtedly there will be some assumptions that will be challenged but if you are able to demonstrate the strength of client relationships (e.g. signed contracts) and a history of growth then this should help you when challenged.

Make sure you get the right advice and support from professional advisers. Undoubtedly there will be various complex accounting, tax and legal issues that will arise. You may not recognise these and you don’t want them coming back to haunt you. It is therefore important to have the right accountants and legal advisers to guide you along. For more information then please contact us on 0208 429 9245 or email us at info@wisteria.co.uk.