Selling a business during a recession

Recessions are tough on business. Those that survive are better equipped to benefit from the upturn when it arrives – but weathering the storm and providing the financial muscle to gear up after a long period of cost control or suppressed demand can be a challenge.

It is not surprising, therefore, that many businesses see now as a time to sell and take the rewards from the business that they may have spent many years building. But what value can you expect? And what demand is there?

Whilst it may be a good time for you to sell, it may not be a good time for others to buy! They may not immediately see the benefits of buying your business for themselves or as an addition to their business where they can leverage more market share but cutting out duplicate costs.

First, then, you must be clear and realistic about why you are selling and the price you expect to receive. If you have to sell, and sell quickly, then you must price the business realistically. Get an up to date valuation of all you assets from a reputable and independent valuer. This means getting current market values for any land or property and making sure that you understand any restrictive covenants in their use. For example, you may have a wholesale nursery business on 3 acres of land which could, with a change of use, become housing or industrial development. This can significantly change the value of your business.

Get your financial affairs up to date. Clear whatever debt is reasonable and make sure that all commitments are fully paid. Check on any leasehold terms to make sure that you can substitute a new tenant without recourse to yourself.

Of course, if you are a joint owner or a majority shareholder, you should have cleared the sale with the other investors. Maybe there are pre-emptive rights giving them first option to buy your share of the business at a fixed price. If not, a sale to someone you know and who knows the business will significantly reduce the sale costs and speed up the process.

If you do not know who to sell your business to (say a major competitor or complementary local business) then you will need some help to market your company. There are many business transfer agents that act like estate agents in listing and advertising small businesses for sale. These charge a fee and also have useful contacts into solicitors and accounting firms that specialise in valuations and sales. Make sure that you get several offers to make sure that you are getting the best deal.

Finally, and most importantly, be realistic on price and what people actually want to buy. You may be approached just for the trading name and customer list, the current assets of the business or for the whole going concern. Not many will want to buy the company unless they know it since there may be hidden perils that even a due diligence exercise may not uncover. Know what you want – but be flexible! As with mobile phone offers, there is something out there for everyone.


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