Top 10 tips to prepare your business for sale

We are regularly asked ‘how should I get my business ready for sale?’ That’s a good conversation for either myself or one of my colleagues in the Corporate Finance team to have. More often though, we are asked ‘I’m thinking of selling my business, do you think you can get it over the line in 6 months? This is not such a good conversation, as a lot of factors are at play to make this achievable. Has a buyer already been found? Have you agreed a sale price and if so is this formalised in Heads of Terms? Have you considered the tax implications of a sale including actions that would mitigate any tax liability arising?

Getting your business ready for sale is important, to ensure that you are able to achieve the maximum value for your business – noting that in many instances this is a once in a life time opportunity Mark Smith, Corporate Finance Director shares his top ten tips for preparing your business for sale.

1. Be realistic about timescales

These things take time, particularly if you want to achieve the best possible outcome. I have had transactions take 3 years to complete , COVID didn’t help, and that was once I had found a buyer. Having initially decided you want to sell to getting the deal over the line I would suggest it takes 12 months as a minimum. If a Buyer has been found – then between 3 and six months would be a good rule of thumb.  The larger the business, the longer it tends to take.

2. A sense of realism – price

Be realistic on the price. Unscrupulous advisers will promise you a mountain of cash, sign you up for 2 years with an upfront payment and then………tumbleweed.  If you are given an indicative valuation for your business ask the provider to support it with recent transactions, data is available, so ask the adviser lots of questions. A good adviser will talk you through the valuation, what their assumptions are and importantly, how they have calculated other factors, such as excess cash, in arriving at the amount on the bottom of the cheque.

3. Make your business the best it can be

Sellers will say to me, ‘my business is great, someone coming in could do this and make double my profits’. If that’s the case, you need a clear rationale as to why you haven’t taken those actions yourself. When I am advising a Buyer it’s rare that we negotiate a price based on what a Buyer can do to generate more profits. I’m looking at the business as it is now. So as a Seller, make the business the best it can be.

4. Understand your financials

Have a handle on your numbers and the key ratios; such as gross profit margin and EBITDA (Earnings Before Interest Taxation Depreciation Amortisation).  The Buyer would like to see a clear and consistent and ideally improving pattern. If you can’t present this – why not? Unusual movements should (as best they can) be quantified, so that what you can display is the Maintainable EBITDA, with anything unusual stripped out.

5. Market your business – but not for sale

Linked to making your business the best it can be, whatever your business, it’s important that people know about you. If you make the best quality garden furniture and have rave reviews from repeat customers then that’s great, but even better if people know about it. This is not all about costly messaging, it’s about getting your name known and out into the market.

6. Skeletons in the cupboard

Most businesses have these and going through any sales process will open the cupboard. Skeletons are fine,, but you need to be transparent about them. For example, if a Senior employee left and you had to make a financial settlement that could be a skeleton. What’s more relevant is what have you done to replace this person and how you have perhaps changed your internal processes to make sure it shouldn’t happen again.

7. Engage professionals

For most people this is a once in lifetime opportunity. Selling a business that you have built up over a number of years can be an amazing opportunity, but equally things can go wrong. Good professionals will guide you through the process step by step, be frank with you when they need to be and always fight your corner. Good professionals do not come cheap, but they should provide you with a service that you value. Every professional will charge a premium rate for this service, but in return you should expect and demand a premium service.

8. Work with your professionals

Your professionals should be able to provide a list of potential buyers that might be interested in your business, but they should engage with you. Not only will you have industry knowledge of potential buyers, you might have a list of potential buyers that you would not be happy to sell to, for example because you think they will look to make significant staff cuts or because you don’t like their approach to for example ethical trading.

9. Book a holiday – during the process

However good your professional advisers are, this will be a traumatic and stressful process that at times you will wish you never started. If you don’t believe me, and this will read oddly, I’ve a list of happy clients that have provided me with testimonials, that will say that the process was extremely stressful – however much praise they then lavish on us for taking them through the process. As you go through the process book some time out of the process. Your advisers should be able to work with you on this, even if you set aside an hours call in the middle of the week, you will want to have a holiday.

10. Plan for the new you

You will complete a sale, possibly with a transitional period to work through – but you will have time on your hands.

Think about what you will do when you have that time. One of my favourite clients has done this really well and takes a holiday at least once a month now. A mix of UK and overseas holidays and some would say nothing overly extravagant but it’s what they like doing, prior to selling their business they simply didn’t have the available time. Use the opportunity to do things you never had the time to do when you were the business owner.

If in business you are spending say 60 hours a week at work, that is a huge amount of spare time you will have to be able to enjoy, there is only so much coffee you can drink and walking you can do!

If you are considering selling your business and are interested in speaking to Mark or a member of our Corporate Finance team about how to prepare your business for sale, get in touch by calling 0330 058 6559 or emailing hello@scruttonbland.co.uk