Your business has been a huge part of your life for years, but now you’re keen to sell up and move on.
And it seems the market — generally — is in a good place. For example, recent Office for National Statistics figures show the total value for domestic mergers and acquisitions during 2018 was £26.5 billion, the highest recorded since 2008 at £36.5 billion.
But the process can be complex and there’s a lot to consider.
However, the good news is there are some straightforward steps to take to increase your organisation’s market value and to get the best deal.
Plan ahead and employ the right people
Regardless of the sector you’re in, your business should be full of people capable of running it profitably without you. At the very least, this gives you flexibility and a choice for the future: continue to own the enterprise with staff running it, or sell it.
And of course, the make-up of the existing management team, and their combined expertise, may well be a deciding factor for a buyer coming into the business.
Think about the end result you want
It’s important to step back and assess exactly what you want to happen with the sale.
What is important to you? Is your primary concern to sell the business for as much as possible? Are you concerned about existing customers and clients remaining loyal once you’ve left? What about existing staff? Do you have an ideal purchaser in mind? Perhaps you want to sell to the existing management team, or another trade buyer?
The answers to these questions — amongst many others — will help you plan your exit strategy so you know exactly what you’re working towards.
What’s going to be sold?
It’s important to consider what the sale will actually include. Is it assets or shares? Is property included? What about intellectual property?
Is your business ready for sale?
Whether you’re thinking of selling imminently, or it’s something for a few years down the line, it makes perfect sense to have your business ready for sale, so that it can attract the right buyer, paying the right price, at the right time.
And if it’s in good shape now, even if selling’s not an immediate priority, you’re ready for any sudden changes in circumstances that force you to sell such as ill health.
Audit your processes and procedures — get rid of inefficiencies, unnecessary costs and make your business as profitable as it can be. After all, potential suitors want a profitable business.
Cashflow is king
Your business needs strong cashflow to operate successfully and to be attractive to a possible buyer. If you can evidence such cashflow is likely to continue for years to come, then the ball is firmly in your court when it comes to negotiating sale terms.
Negotiate the best deal for you
Sometimes, hard cash does change hands at the point of sale.
That said, transactions can often complete on the back of deferred cash, loan notes being issued in favour of the seller or earn outs where a percentage of the agreed sale figure is based on future business profits.
Anything other than cash being paid to you at the point of sale will delay receipt of the full sale amount. But by knowing what you want and by having a profitable business with strong cashflows, you will have the advantage in negotiating a deal with as much up-front cash as possible.
And that all starts with preparation, now.
If you’re considering selling a business, a financial planner can talk you through the options.