Grooming a business for sale

By the time you have started exploring how to sell your business you will already have made a number of crucial choices in coming to your decision. You will have taken into consideration your own position as owner and possibly manager. You will have thought about the impact it will have on your staff, customers and suppliers. Prior to either of those, however, you will have considered the future of the business – what you want for it and what it has the potential to achieve.

In making the decision to sell up, you will already have gained confidence in it being a realistic prospect – so what next? Starting the actual sale process will bring all your prior decisions back to the forefront and then heap on plenty more. So how do you start this process?
You can forge on your own with the business nous that has put you in the position of being a successful business owner. Or you can begin by looking to others, gathering experience and making the necessary and well-advised decision that will ensure you get the top price and best future for your company.

Mustering the troops for the mission can not only share the pressures of the sale, but also use professional expertise to fully explore every nook and gain the best possible value. An accountant and solicitor are the first to turn to, with some accountants also able to fill the indispensable role of corporate tax advisor. Make sure your accountant has experience in maximising tax efficiencies in business disposals. A specialist business broker will be able to deal with potential purchasers and devise negotiation strategies. The onus of these actions is a heavy one, and being able to delegate them to a broker will allow you remain focused on maintaining your business.

Advance research and recommendations are key in finding the right aides to assist with your sale, and you will likely find that the people you hire first can give valuable opinions of whom you hire next. Confidence, like-mindedness, relevant experience and good references are all factors of which you must be assured in your advisors.

Once you have found them, however, you are several significant steps closer to a successful and profitable sale. Their charges are negotiable – ranging from hourly rates to fixed fees, with some also accommodating success fees depending on the result – but there is a strong chance that these fees will be cancelled out by the added value they will gain for your business.

An area that the experts will be able to elucidate most is what kind of timeline you can expect and, to a degree, create yourself for the sale of your business. Timing can make all the difference on the amount of money you generate from your sale, and your advisers will be able to pick the optimum moment.

What they will tell you is that planning ahead and making sure you are fully prepared is essential. Selling your business is not an overnight process – it is a careful series of interdependent movements that could take months or even years to complete. It would not be overcautious, if you are planning retiring in five years time, to start exploring the necessary actions for a sale right now. That amount of time will give you a cushion if the economy takes a turn for the worse, it will allow you to make the necessary improvements while not giving your intentions away and it will also reduce the pressure and urgency on you.

What a good advisor will also tell you is that, while the long-term plans are being devised and enacted, it is wise to keep them confidential. Long-term uncertainty can cause clients and suppliers to become concerned. If staff were to catch wind of rumours and conjecture about the future of the business they too can start to feel unsettled. While preparing your sale it is vital to maintain stability and show potential buyers exactly what the business looks like in its regular day-to-day operations.

The ideal time to sell is when profits are on the up and show a likelihood of increasing even further. There are certain points in an annual business cycle where this can be more likely – find them and focus on them. Make one your target and plan your streamlining and improvement actions to culminate in time for it.

When someone looks at your business with a view to buying it, what do they want to see? A strong and organised financial performance can pay dividends and, with that in mind, if everything is not in exemplary order then that is the first place to start actively grooming your business.

A stable accounts ledger throughout the year shows good control of working capital. In the run up to a sale, bringing forward or delaying specific deals may help you even yours out if necessary, but you must be realistic. A buyer will have advisors just like you do and unrealistic quick fixes are quite clear to the trained eye. Reducing stock levels, shaving superfluous perks; reworking contracts and shedding unnecessary equipment will also work to your advantage – but not in the extreme. Be measured: you should only do these to a point before they start affecting your business, because keeping it healthy and productive is the most important issue.

To this end, a streamlined business is, generally, an impressive business. Evidence of efficiency and clear management processes will let a purchaser know that what they are buying into is an attractive and reputable prospect for a good business. If you are the manager and the owner, it will help for a buyer to be able to see who will catch the ball when you leave and what structure is in place for the rest of the staff.

What they do not want to see, along with a loss of structure, is an impending exodus following your departure, from staff not adapting well to the new business model. Keeping key senior staff – possibly with the use of incentives – instils confidence in both buyer and employee and is a very important consideration.

The streamlining could also be carefully applied to your client base, but careful is the operative word here. The reactions of long-term clients (ones who may receive or expect special treatment, particularly challenging ones) to and positions in the sale, must be kept in mind. If any are working on verbal contracts then it is crucial to commit something to paper: the last thing a new manager wants is an ornery customer relying on an agreement of which there is no evidence.

The sale of your business is not something that is entirely dependent on the actions of others. As with the business’ premises, you can be completely in control of passing this precious entity that you have created on to others, and with diligence, foresight and care to detail, maximise your sale price.

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