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Preparing Your Business for Sale in the UK Selling a business is a major decision that affects not only the proprietor of the business, but also his family, business associates and patrons. There are many issues that need to be considered. For example, why are you selling the business? Will you be focusing your energies on another business opportunity, or do you plan to retire? Do your family and business associates support your decision to sell? Once you have thought everything through and determined that selling your business is, indeed, what you need and want to do, there are some steps you can take to prepare your business for sale.
Show profitability
The sale of a business should be planned as far in advance as possible to allow you time to take steps that will make your business’s financial records appealing to potential buyers.
You will need to take control of working capital—perhaps by reducing stock levels or controlling creditors. You should also look for any opportunity that will enable you to cut costs. For example, you may be able to renegotiate supply contracts or do away with some employee perks. You could also consider selling infrequently used equipment.
Your business’s accounts should be presented to potential buyers in a manner that makes them as attractive as possible. Businesses that show consistently increasing profits make the most desirable acquisitions for purchasers. You should also be sure that the business shows a stable performance throughout the year. It may be possible to push forward or delay sales or purchases to help achieve this goal. You might also consider changing some of your accounting policies.
Good sales forecasts that can be substantiated by evidence are an attractive quality in a business that is for sale. Prospective buyers love to see full order books.
While you do want the financial performance of your business to appear as healthy as possible, it is important to be honest with potential buyers about things like bad debts. Shrewd businesspeople will be able to tell when you have used a “quick fix” to make your profits appear higher than they actually are. Additionally, honesty regarding your business’s negative traits will lend all of your good information extra credibility.
Short-term profits can be maximised by reducing long-term investment in areas such as advertising and new employees. However, too much cost-cutting should be avoided. The business will suffer if you do not continue spending for necessary maintenance. And this, in turn, will affect the price a potential buyer will be willing to offer.
Show a strong foundation with good growth potential Buyers offer higher prices for businesses in which they have high levels of confidence. Prospective buyers should be shown your business plan, which should lay out a clear and successful strategy.
If the managerial duties of your business are chiefly carried out by you, you should seriously consider hiring a management team. If a buyer believes that a business’s success is due primarily to the owner’s presence, he will likely become less interested in the purchase. This risk is eliminated when a strong management team is in place.
You should be able to show a clientele base that is expanding and not dependent on a handful of key customers. Any informal debts you have with patrons or suppliers should be formalised before the business is offered for sale.
Consider having the business evaluated by your legal advisors to be certain that you are in compliance with all health, safety and employment legislation. Legal advisors can also assist you with settling any legal disputes and affirming ownership of any intellectual property the business may hold. Property contracts should be in good order.
Other tips
As previously mentioned, advanced planning is key in selling a business. In fact, a strong case can be made for designing and including your exit strategy in your original business plan. Doing so can help prevent impulsive decisions that often turn out to be ill-advised. Poor decision-making during the process of selling a business can make the sale far less appealing to potential buyers and leave you financially worse off.
You should work to exhibit flexibility and a willingness to cooperate during the entire sales process. Be sure prospective buyers know that you would be prepared to spend some time helping them become familiarized with the business after the sale. Additionally, if you agree to stay on at the business as an employee for a fixed period of time after the sale, it can be an attractive selling point.
Where can I go for more information?
For more information on preparing your business for sale in the UK, visit this government-sponsored business website: http://www.businesslink.gov.uk/bdotg/action/home?r.l1=1073861225&r.l3=1074410823&r.l2=1074400490&r.s=m Businesses for sale
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