Steer Your Business Dec 2020 - Magazine - Page 19
do you prepare to
sell your business?
Imagine you are a SME owner that has developed a
business over the course of several or many years. You
decide the time has come to exit; you may want to be
spending time with grandchildren, spending time travelling around the UK in your camper van, or something
else. But where do you start?
In the first instance, it is essential to talk to your accountant and your independent financial adviser. They are
the specialist financial experts who will guide you through
the tax implications to find the best path for you and your
particular circumstances. You need to do this early.
You should then very seriously consider whether you
are selling a business or a job. If you have all your processes and procedures documented and staff trained
and are running those processes efficiently and effectively, with little intervention from yourself, then you
are selling a business. It could be that you have a great
management team in place; this is even better, as there
is potentially someone there to step up and run the
company after your departure.
However, if the business is totally dependent on you
to make every decision, then you are potentially attempting to sell a job. This is extremely hard to achieve,
especially if all the expertise is in your head.
The truth of your particular situation may lie somewhere between these two extremes. That said, in order
to realise a transition to a new owner, you will most
likely be asked to stay in the business for between
three and twelve months and a clause to this effect will
be put in the Purchase and Sale Agreement. A portion
of the payments may well be attached to delivering a
successful transfer. (That said, it may be possible that
you actually want to stay in the business.)
Your aim, in preparing to sell your business needs to
be targeted at readying your company to run without
you. This will probably take time as you need to break
out of the restricting mould you find yourself in. You
should be prepared to ask for help in putting your business in order.
The next step is ensuring that you have all the documentation potential buyers will request. This documentation will include:
• Ownership structure (including subsidiaries and
• List of all directors and shareholders
• Last three years filed or statutory accounts to
include Profit and Loss and Balance Sheet
• Last financial year and year to date monthly
management accounts (Profit and Loss and
• Current year monthly management accounts
(Profit and Loss and Balance Sheet)
• Current year forecast and future years (if
Current balance sheet
List of current mortgages, charges and
List of personal guarantees
Summary of any debt (with related security),
leases, hire purchase including amount outstanding, debt provider, and period left to run.
List of current employees (can be anonymous)
covering role, years of service, annual salary &
List of top 20 customers (by annual sales)
(can be anonymous)
List of top 20 products/services (by annual sales)
Once you have completed all these tasks, then you are
on your way to being prepared for your potential buyer.
Then comes the question of price and valuation.
A search of the internet can help to an extent. You
need to have in mind a realistic number which should
be based on facts, namely the current profitability of
the business and the current value of any assets held
by the business, including property, if owned, and key
pieces of machinery.
Also you need to consider what kind of sale you
want: a share sale (whereby the business is sold as a
going concern) or an asset sale (selling off the individual assets such as machinery, inventory etc.).
Finally, how are you going to put your business on
the market? Are you going to use a broker? Or your
accountant? Or your existing network of contacts? Or
maybe you’ve been approached in the past? Whichever path you decide to follow, make sure you understand
the full ramifications of what you are doing with your
In this article, we have covered “preparing to sell”.
There are a raft of other measures you
can take, such as increasing your
marketing effort to improve sales,
working on your cost of sales and
overhead efficiencies. That is for
Over to you, and the very best of
James Richmond was a management consultant
for over 25 years, specialising in turning around
the UK and European operations of numerous
factories in many differing sectors from airline
catering to industrial scale sandwich making to
the steel industry. These days he is into buying
SMEs, primarily in food manufacturing. You can
connect with James at: https://www.linkedin.