Tips for preparing a business for sale

The Low Down on Selling your Business When you have reached the decision that it is time to sell your business, for whatever reason, the key to a successful sale is preparation. Be Prepared The first step in preparing for the sale of your business is to collect all the relevant information and documentation pertaining

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The Low Down on Selling your Business

When you have reached the decision that it is time to sell your business, for whatever reason, the key to a successful sale is preparation.

Be Prepared

The first step in preparing for the sale of your business is to collect all the relevant information and documentation pertaining to your business so that it can easily be produced for any prospective buyers to view.

The file should include:

  • The company’s certificate of incorporation
  • The contact details of all shareholders and company members along with their share and membership certificates
  • The company’s statutory books
  • The most recent annual return
  • Financial statements for the past three years
  • Documentation of any floating and fixed charges
  • A list of all employees, their contracts and current salaries as well as proof of their pension policies and the figures contributed by both employee and employer
  • A schedule of assets
  • Information pertaining to all company banking arrangements and facilities
  • A copy of any trademark rights or copyrights
  • A copy of any software licence and any other licence held by the company
  • A copy of the leases relating to the company property
  • Documentation of business rates
  • Current insurance policies
  • A copy of any leases or agreements for hired equipment
  • A copy of all repair and maintenance agreements

Once you have compiled your folder you now need to start giving serious thought to how much you intend to ask for your business.

The Asking Price

You will no doubt already have a ballpark figure in mind when it comes to the asking price for your business but that figure should reflect the true worth of the company and you will need to have taken into account aspects such as annual company turnover as well as annual profit and loss.

Whilst everyone hopes to make a profit when selling their business there is no point in overpricing as, in our current economic climate, an overpriced business is unlikely to arouse much if any interest and any prospective buyers will want to know how that figure was reached was in the first place.

Unless you are 100% confident in valuing your business yourself and are fully aware of the current market value for businesses in your sector it would generally be advisable to employ the services of a valuation expert. Whilst this service would cost a valuation expert would be able to give your business an honest valuation which, subsequently, should help it sell more quickly than a self valuation.

Help with the Sale

Unless you already have an interested party or parties wanting to buy your business you are going to need a sound marketing campaign and it makes sense to seek the help of an agent who has experience in selling businesses such as yours.

There are several reasons why employing an agent to market your business would work in your favour:

  • Allowing someone else to take control of the marketing enables you to continue the day to day running of your business without having to sacrifice precious work time to carry out the time consuming process of marketing yourself
  • A professional agent will know exactly how and where to advertise your business to gain optimum interest
  • Many agents will already have a network of buyers on their books and may well be able to ‘seal the deal’ much faster than anticipated

The Sale

If a buyer puts in an offer for your business which you accept and the buyer pays that price in full this is known as a ‘cash out’ sale. However, a cash out sale figure is generally less than the seller would receive if he had been required to extend any of the terms to complete the sale. If you are asked by the purchaser to extend any terms in order to complete the sale then, essentially, you are within your right to ask a higher purchase price.

Paving the Way

Once your business has been sold the new business owner may well ask you to spend a certain amount of time going through each aspect of the business with him to ensure the company is running smoothly before you walk away.

You are under no obligation to do this but, if you do not wish to have anymore dealings with your old business, you should inform the buyer of this in plenty of time so that he can start putting other plans in place.

If you are preparing to sell your business, contact me for further practical and legal advice so that your sale goes through as quickly and as cost effectively as possible.

David Swede

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