As a business owner, you’ll be used to making important decisions, but none more so than deciding to sell your business. After investing lots of time, money and energy into nurturing and growing your business, ensuring it’s ready for sale is pivotal to its success.
When you come to this crossroad, to make sure you hit the ground running on whichever path you choose next, you’ll need to start planning your exit strategy as soon as possible. To assist you on this quest, we’ve put together our top tips to help you prepare your business for sale. And let’s not forget about you; preparing yourself for life afterwards is all part and parcel of the process.
The end of a chapter, or the start of a new one?
When we come to make any big life decision, it’s always beneficial to ask yourself how this next step will bring you closer to your ideal picture of the future.
To get to where you want to be, you’ll need to set financial goals and objectives.
These goals and objectives should include your life post-business sale. Perhaps there are things you’d like to do now, while you can, you suspect the business is worth enough that you won’t need to work again, or you have an interest in something completely different, and you would like to try your hand at something new.
Are you keen to end a chapter? Or start a new one? There’s no right or wrong. But both need preparation.
Is there a right time to sell?
In the perfect world, you would sell your business when profits are skyrocketing, with buyers in abundance and when you feel ready. But life doesn’t always pan out that way.
Only you will know when it’s the right time to start the business sale process and the reason for it. Maybe it’s time for a fresh start, or your heart just isn’t in it anymore. Maybe personal circumstances have forced the change.
Whatever the driving force, rather than focusing on the timing, it’s all about being prepared when the time comes. And by that, we don’t just mean boosting the balance sheet and getting things in order. Life after the sale needs careful consideration too.
5 top tips for preparing your business for sale
1. Visualise the future
After years of dedication to the business, it can be hard to imagine life beyond. But visualising this will play a crucial role in influencing the type of deal you end up making.
For some, it might be a clean break to live their remaining years enjoying the money they’ve worked so hard to get. Others might want to keep their foot in the door with an earn-out period.
Working out a vision for the future helps shape the present and prepare you for your eventual business sale.
2. Find the right price
Ask yourself: how much do you think you would need now to walk away from your business and live your ideal lifestyle from here? You need to have this magic number in mind before you even think about selling, so you know what you’re aiming for as you start considering offers. If your business valuation is likely to be more, that’s great. If not, it’s time to reconsider your options: you might need to adjust your expectations of what your lifestyle will look like in the future.
That said, it’s wise not to jump at the first opportunity or highest offer. Look around and make sure any potential buyers have the best intentions for your business. You want to find the right people offering the right price.
3. Think tax
Prioritising the financial planning and tax planning considerations in your exit strategy will save you a lot of time and money in the long term.
You’ll want to discuss tax planning with a professional tax adviser or your financial planner, looking at pension planning, inheritance tax and capital gains tax.
4. Go with your head and not your heart
You will have poured your blood, sweat and tears into your business, so naturally, there will be an emotional attachment to the company, and you may find it hard to let go. But emotions can lead to irrational decisions, so taking a step back from this can be the hardest part of the business sale.
Surrounding yourself with a team of experts (see our next top tip), who will look at the sale objectively and put your best interests at heart, will help to keep you at arms-length from an otherwise highly charged, emotional decision.
5. Assemble your team
It’s helpful to know who you’ll need in your corner and when.
You’ll need to work closely with your accountant in the years leading up to selling your business because the strategy you have taken regarding the business structure, shareholders, profit extraction and so on could be different if a sale is on the cards.
It is also a good idea to work with a financial planner who can provide a life planning approach, lifetime wealth forecasting and personal tax planning. They will help you visualise the future and bring it to life when the time is right.
When it comes to the ins and outs of the business sale, you might need the help of a corporate lawyer. They can help negotiate the terms of the sale and draft any contracts or non-disclosure agreements.
Remember, it’s not any business; it’s your business, so you’ll want to have the best team around you, even if it does cost a little more.
If you would like to hear any more of our top tips or want help preparing your business for sale, please get in touch and speak to one of our trusted financial planners.