Selling your business is one of the most difficult things you will ever have to do in your business life, so it is important that you think through the consequences of your actions.

Like any good story it has a beginning, a middle and an end and strangely the first thing you have to think about is:

1. The end

You need to be clear in your own mind of the consequences of your actions in selling the business and particularly what happens afterwards. For example, if this is part of your retirement plans that is one thing, but you may not feel ready to retire. Also , will the sum of money you obtain for the business be sufficient to permit you to live to the standard you expect to? If not, what does that mean to your lifestyle.? If you are not ready to retire what are you going to do with yourself? Does this mean getting a job? Are you considering investing some or all of the proceeds in a new business? Also, selling a business that has been part and parcel of your life for many years has for some people been likened to a bereavement and you can feel a huge loss. It is important that you understand this and make plans to fill the void. I have seen several instances over the years of people who have not been prepared and cannot cope. These are just some of the things you will need to think about. However, if you think this through and put some plans in place there is far more chance of a happy ending.

2. The beginning

You must give yourself plenty of time. It is no good deciding that you want to sell the business at aged 64 and a half when you are already booked on your round the world retirement cruise in 6 months time! You must give yourself a chance to maximise the value of the business by preparing it for sale. In an ideal world you would start to think about this 5 years before you planned to sell but try at least to give yourself a couple of years of preparation.

Such things to think about would include the following:

1. How vital are you to the business? The more vital you are, the less likely you are to increase value as, if you are the business, what will happen without you? You need to try and ensure that the business can run effectively without you by delegating tasks to others who can ensure you will not be missed. We all like to think we are indispensable but when you are selling a business this is not a good thing!
2. If you are not key to the business, is there anyone else who is? If so, again you need to make the business less reliant on that individual.
3. Is your business future proof? You need to ensure that the business continues to evolve and is not just a one trick pony as if that area of trade has no future then your business has no value.
4. What is the value of the business now? Is it sufficient for your end game and future plans? If it is not how do you plan to make the necessary changes to increase its value. (Valuing your business is a whole new blog in itself!)
5. Who are the likely buyers of your business? Are your management good enough to carry out an MBO? Is there a competitor that would make a trade sale more attractive? Is an MBI feasible? Or can more value be extracted by some kind of reorganisation to hive off some or all of the trade leaving the property in your own hands as a form of investment? These are just a few of the considerations you should be thinking about.

3. The middle

This involves some of the mechanisms you need to think about such as:

1. Talk to your accountant. Tax may well be a significant consideration and you need to understand that some of the methodology we are thinking about in Section 2 above can alter the tax situation. Remember what is tax effective might not always create the best result. You can only consider the tax position at the time you are contemplating a sale, so you need to get a feel for what you have to think about. Make sure your accountant has the skills to give you that sort of advice. Not all good accountants are themselves good tax advisors and vice-versa so do not be afraid to ask the difficult questions.
2. Talk to your solicitor- Again getting the right sales agreement in place with the right level of protection for you as the vendor is vital but remember that the purchaser will want all sorts of covenants in place for their own protection so you want a solicitor who knows his way around buying and selling businesses. Your solicitor who handled your house purchase and drafted your will may well be excellent at those tasks but that does not necessarily make them good at getting the right agreements in place to sell a business. Again, ask the hard questions. Most solicitors I know will not take offence as it does them no good to try and do work they only know in theory but not in practice. For something as fundamental as this, be prepared to put the work out for tender and seek third party advice as to suitable firms.
3. Keep your team in the loop. Particularly if this involves family members. I appreciate that there is a large element of confidentiality in this but by the same token you need everyone on board and rowing in the same direction. Change is very unsettling but if you look after your team they will look after you.
4. Make sure your will is up to date and future proofed. I have known deals which have failed to come to fruition because the vendor has not got a proper will in place and the vendor’s family have problems in completing the deal and maximising value. Keep your executors in the loop to ensure that if the worst comes to the worst your wishes are fulfilled.
   Making sure existing agreements are robust. For example, if the location you operate from is key and your lease is running down, consider whether negotiating a new lease to give some certainty of occupation is the right thing to do? For a trade sale that may or may not be a good thing , it will depend on who you are selling to, but you must at least consider it
5. The use of advisors- Whether it is an agent appointed to sell your business or someone with no axe to grind who can provide an independent voice of reason choose carefully. Make sure of the Agent’s terms or the advisor’s costs. Contingency fees might be attractive but at what cost? See who/what is out there.

These are just some of the considerations but hopefully, in this blog I have given you a flavour of the things that you as the owner of the business may need to consider.

One final tip

Be prepared to walk away from a bad deal. However desperate you are to sell, make sure you are getting the best deal for you. Strangely that may not be the deal that has the potential for the most money, but it could be the one that gives you certainty. When the deal is done you may have regrets, but the main thing is to be able to sleep at night knowing that you and your family are benefiting from those years of hard work.