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Selling your business? Get your house in order
Over 500,000 entrepreneurs start a business every year*, investing time and
money to build their business to a successful level. Yet, when it comes to
planning an exit strategy, independent business finance company, Bibby
Financial Services (BFS), believes many owners aren’t making the necessary
provisions to ensure a successful, profitable sale.
David Robertson, BFS’ chief executive, said: “Deciding to sell your
business can often be as exciting as starting out, with owner-managers
dreaming of new plans for their future, whether it’s a new business
venture, traveling or retirement. But it is crucial to keep a clear head as
there is a major risk of business performance suffering while under
scrutiny from potential buyers if business owners become too distracted by
their next goal.”
In order to help owner-managers avoid some of the pitfalls associated with
selling a business and ensure that they get it right first time, Robertson
gives the following advice:
1) Get a game plan – planning the sale of
your business at least 18 months in advance will help maximise the value
drawn from the sale.
2) Set goals – be very clear on your
reason for selling and write down each objective. These could include:
setting a target price and date of sale, securing the jobs of your
employees, minimising personal tax liabilities and ensuring the business
has been correctly valued.
3) Seek guidance – choose advisors
carefully, ideally those with expertise in selling businesses.
Optimum support can be provided from specialists such as corporate finance
advisers, taxation experts and corporate lawyers.
4) Prime for success – ensure key
elements of the business are in order, to show it in the best possible
light, including: having assets in good condition, making sure
IT/Information systems are running smoothly and formalising verbal
agreements with customers and suppliers.
5) Get your finances straight –
exercise tight credit management and stock control to improve your working
capital. Confirm provisions for bad debt are realistic and
irregularities are accounted for. Coincide the sale with a newly
completed set of audited accounts - this will help reduce uncertainty of
profit for potential buyers.
6) Craft the Memorandum – the Sales
Memorandum, a marketing document sent initially to potential buyers, should
reveal hard facts and portray the business as attractive, illustrating its
potential.
7) Target prospective buyers –
anonymously approach around 30 potential buyers to gauge interest.
Ensure your adviser has drawn up a confidentiality agreement, detailing all
the hard facts relating to the terms of the sale, for interested buyers to
sign.
8) Size up the offers – questions to
be asking at this stage include: what your responsibilities and liabilities
will be? How will the purchase be financed? Length of time for
completion of sale? How will the business be run in the future?
9) Source the best deal – carefully
play off prospects against each other to promote higher bids. Be
prepared to negotiate.
10) Formalise the offer – agree
Heads of Terms with the buyer. This will usually be subject to further due
diligence.
Robertson concluded: “Whether starting a business from scratch, or taking
over a business and growing it, owner-managers invest large amounts of
time, effort and money, and selling is often an emotional and bittersweet
experience. By keeping an eye on the prize, and ensuring the business
is in tip-top condition for potential buyers, any owner can obtain the best
price in a reasonable amount of time.”
For further information on financing a business contact Bibby Financial
Services on Tel: 0800 91 95 92
