In this article, we discuss what to consider when selling a business, taken from the original article by Tim Weymouth Dip CII “Four tips to consider when selling a business” at Aston Lark.
As a business owner, your business endeavour usually ends with the sale of your company. When you’re ready to leave or retire, you’ll want to maximise the worth of your company. The business valuation and sales process involve several aspects. Award-winning insurance brokers, Aston Lark, have some suggestions for selling your company:
1. Does it have a market?
You need at least one interested buyer to sell anything, so consider your potential buyers and how you want the transaction arranged to maximise the sales price. Do you wish to sell and retire immediately or scale down your involvement? These two alternatives may attract buyers differently.
Investigate your competition or your clientele. Whether a small business or not, our clients frequently purchase critical suppliers to preserve supply chains.
Time kills deals. Timing is essential when selling businesses, just like selling a home or car, so pick your time carefully for the best price.
2. Communication is key
Business selling can be stressful for all parties. The goal is to have early and open discussion in an initial meeting between directors and personnel, with middle management holding smaller local meetings - to encourage key employees that a potential business sale and new owner might provide new opportunities.
While certain portions of the deal structure may demand privacy, make sure the rest of the organisation hears it first and that you acknowledge any concerns they may have.
At this stage, you should consult your insurance broker, just as you would your solicitor or accountant.
3. Organise your books
A prospective buyer will seek extensive financial information as well as information on other assets such as human capital and plant/machinery in their potential new business. Prepare to supply and make it as simple as possible. Using an online data room or corporate finance adviser can help here.
A buyer may question your risk management strategy if your insurance portfolio is lacking. With Transaction Liability insurance, you can ensure a smoother exit and all parties are confident in the seller’s guarantees and indemnities.
In particular, management liability plans should provide run-off cover for any claims filed. Most transactions will trigger a change of control clause. This can include intellectual property and tax implications. When you notify your insurance broker you want to sell your company, they should bring up these two considerations to help you make a decision on the right buyer.
4. Incorporate buyer perception into your planning.
Ensure your business assets’ worth is realistic and there are eager purchasers, ideally with a proven track record. Consider your company’s strengths and weaknesses and how to improve them. Generally, interested buyers prefer an honest asset sale agreement to increase their buyer confidence.
Prepare for the next round of discussions. Even if you started the company, it will be difficult to sell it without passion. Consider getting professional advisors to cover potential legal implications if you find your exit strategy may need revising or you need help solving employee disputes. Interested parties will stand firm if you have an accurate and well thought out sale and purchase agreement.
For the full article, visit Aston Lark here.