When you’re selling your business it’s an exciting time, but it can also be a daunting time!
- You want to get the right outcome for you, but perhaps also for your team or for your long-standing customers.
- You want to get the best price, that reflects the hard work that you have poured in to the business, possibly over many years, and the sacrifices you’ve made in that time.
- You need to consider the tax implications, now and in the future, as well as the timing of any deal. It may be more tax efficient to wait for a period of time.
- Is the potential buyer a good fit for your business? If your eventual proceeds are reliant on retention of long standing customers, will they like the new owners, and stay with them?
These and a raft of other considerations can combine to make the whole process extremely stressful!
How do you know how much your business is worth?
There are several points in the life of a business where a valuation is necessary, but it’s at the point of sale that it’s perhaps the most important.
This is one point when it has to be as accurate as possible.
An accurate business valuation requires a multitude of different considerations, including the industry involved and the structure of any offer being made to name but two. There are also a wide variety of tax implications on the structure and timing of any deal.
Every sale and purchase has its own unique circumstances. Our recommendation would be to speak to your accountant as early as possible to ensure they understand your goals for the sale. Their advice will then take those goals into account.
We have a long experience of providing valuations, and the intricacies around them, and we’ve been involved with the process of due diligence from both sides on several occasions. We’re very happy to have completely hypothetical conversations around circumstances so our clients can gain an understanding of how any sale may progress in plenty of time to give it careful thought.
This is one decision that should never be rushed!
What help should you look for?
1 An advisor with many years’ experience of the sales process but also the buying process. They should be able to explain the process and different requirements and know what is likely to crop up.
We’ve been through the process from both sides personally, so can empathise with the stresses and eagerness you’ll experience. It can be a real roller coaster, so having someone on your side who can prepare you and guide you can be key.
2 Advice to ensure the deal is structured tax efficiently. If you sell your shares in a business, the tax implications are very different to those if you sell the business assets.
Your potential liabilities can also be very different!
You don’t want to get to the day after the sale to find out that you have made next to no profit once your tax has been paid, but no longer have your business.
3. An advisor who will make sure your interests are protected. The tax deeds and warranties that a purchaser can request can be very involved, and commercial solicitors are not usually totally aware of the impact each request may have.
You need an advisor who will work with your solicitor to ensure that your team protect you, both at the point of sale and in the future.
We’ve seen proposed deals in the past where the tax bill resulting from the sale was going to equate to 75% of the sale price. Once we pointed that out, the deal was quickly restructured!
4. Guidance to make sure you get a fair price. You may have put many years of hard work in to building your business, to say nothing of the sacrifices you made along the way.
It’s therefore only right that you get a fair return for that effort.
Equally the right advice will ensure that you’re fully aware of the implications of different options in enough time to consider your preferred option, and to renegotiate to take account of them.
These same considerations apply if you’re thinking about seeking investment, perhaps to support a period of growth. It’s essential to know that the correct valuation has been applied if you are giving away equity on your business, so neither party looks back and feels they’ve lost out.
If you have even the first idea that you’re going to be selling your business, now’s the time to get in touch! It’s essential that the business is structured and accounts prepared in the right way to maximise any sale value, so early planning is vital.