You’ve decided to sell your business, done a bit of internet research, and now your mind’s reeling because it sounds both complicated and overwhelming. Navigating the potential pitfalls, including legal issues, financial accounting, taxes, feels like a full-time job in itself.
Oh, right, and of course you’re still running the business you’re trying to sell!
It may reassure you to know that selling your business is like selling anything — and you’re already equipped with skills in this area.
In developing your own successful business, you’ve been thinking like your client or customer every step of the way. You know how to assess the market, consider your potential client’s needs and values, and offer a desirable product or service.
Now it’s just a matter of translating that mindset into thinking like a potential buyer.
What does that buyer want when they’re looking to purchase a business? They want to know that it’s a smart investment and that it will continue to be successful after the sale.
If you’re ready to take the leap (and put your mind at ease), read on for four tips that will help you prepare for the sale and show a buyer that your business is worth it.
1. Identify your goals for the sale of your business
Sell to the highest bidder — isn’t that everyone’s goal for a sale?
Not necessarily.
Before you list your business, consider what matters most to you — what will make you feel good about selling your business.
Here are a few of common goals for business owners who are ready to sell:
Financial gain
You may not have an accurate estimate of what your business is worth yet — don’t worry, that comes soon — but you probably already have some idea of the price range you’re hoping for. Is the highest offer always the one you’d choose? Or would there be contingencies that would make you think twice?
Values alignment
From what drives your business vision to how you run staff meetings, your values inform everything you do. Values may also include your sales and marketing strategy, products and services, customer and employee relations, or things like sustainable practices or employee benefits. If your potential buyer doesn’t share your values, is that a deal-breaker?
Employee retention
In a small business, it doesn’t take long for your employees to start feeling like family. If this is the case, it’s worth considering that your buyer may not feel the same way about your staff. Some buyers may wish to consolidate or have other conditions for employees in the purchase agreement. If this comes up in your negotiations, how will you handle it?
Identifying your goals early on doesn’t mean you can’t change your mind later, as you meet potential buyers, but it’s worth spending some time thinking about how you hope to proceed.
2. Selling your business means it’s time to get your books in order!
A potential buyer wants to know they’re getting a good investment and needs proof in the form of financial records.
These records include current and historical reports — your bank statements, balance sheets, income statements, business expenses, VAT records, and tax reports.
Handing over a few file folders full of payment stubs, receipts, and hand-written notes-to-self will not inspire confidence in your banker — who will assess your business’ worth — or a potential buyer.
If you’re already using an online accounting software like Clear Books, this is one item that you can check off your to-do list. With automated financial information at your fingertips, it’s easy to generate reports that will help you and your banker determine a fair market price.
And if your business reports are already automated, it will make it easier for your potential buyers to know that your business is a great investment.
3. Prior to selling your business, know what’s required by HMRC
A big source of anxiety, particularly for first-time sellers, is understanding the legal requirements of selling a business.
As a decent person and good employer, it goes without saying that you need to inform your employees that you’re selling.
But as a small business owner, you’re also required by law to let your staff know when the sale will occur and why you’re selling. You need to respect your employees’ legal rights, especially regarding the transfer of ownership.
Once you’ve found your buyer and set a sale date, you’ll need to notify HMRC and transfer your VAT registration number to the new owner. If you make a profit from the sale (and we hope you will!), you’ll need to pay Capital Gains Tax.
File under ‘boring but important’, but it’s absolutely critical that you’re in compliance with the legal requirements of selling a small business. If you need help with this, HMRC’s website has more information as well as FAQs.
4. Ensure the buyer’s success
How will you ensure your buyer’s success, once the purchase has gone through?
The potential buyer wants to know that your business can succeed without you, so they can capitalise on their investment. The best way to make that happen is by ensuring a smooth transition — for your staff and for the new owner.
For your employees, there’s nothing more unsettling than a transfer of leadership in the workplace and your team will need as much reassurance and stability as you can provide them during this transition.
Transparency and communication with your staff will put them at ease.
Share as much as you can about what’s coming — timelines, your goals for the sale, and other pertinent information such as dates for inspections or visits from potential buyers.
In your sales contract, show your buyer that you’re committed to a successful transfer of ownership by providing training and transitional support during a specified period after the sale.
Orient the new owner to your software and systems, bring them up to speed on current projects and clients, and share any workflows and record-keeping methods you’ve developed. It also helps the new owner to value your team when you make personal introductions and share information about each employee’s strengths and assets — an effective way to build your team’s trust in the new owner.
If this is your first time selling a business, there will be moments when you feel stressed and overwhelmed.
But intentionally planning for the sale minimises stress, ensures you feel confident in the process, and helps make a smooth transfer of ownership — so you can transition into your next business adventure.
Get your finances in order and get ready to make a successful sale — click here for a free 30-day trial of Clear Books online accounting software.
Clear Books Online Accounting Software
Clear Books is an award-winning online accounting software for small businesses. Thousands of business owners, contractors, freelancers and sole traders across the UK use our easy-to-use online accounting software to manage their business finances. All users benefit from the outstanding free telephone and email support. Clear Books was launched in London in 2008 and offers a free 30 day trial with free ongoing support and bank feeds. We’re rated as ‘Excellent’ on Trustpilot.
Get a free 30-day trial of Clear Books online accounting software here.
