The Decision to sell a business
The decision to sell a business might be the biggest financial decision you will ever have to make. It is important to decide why you want to sell and what selling your business will allow you to do. If you can clearly set out what your objectives are you can enter the process with certainty of what you wish to accomplish and also find an understanding of what your selling price needs to be to make it sensible to sell.

Plan for life after the sale – what will you do next?

Not only is this important in terms of tax planning but you should consider what selling your business will allow you to do in your personal life.

Perhaps it is time for you to retire and find more time for family and leisure or perhaps you feel it is time for a new business venture.

Both have vastly different tax implications a business broker might even me able to help with the transition of ownership from one business to the next.

Consider an Earn Out or Transition Period

For those contemplating stepping down from running their business it may be preferable and more attractive to a potential buyer to plan for a set transition period whereby the business owner carries on running their business in a management capacity helping hand over the reigns to the new owner/s.

Preserving Business Legacy

Business Legacy can be incredibly important to many business owners for many owners their business is the culmination of their life’s work they want to know that their staff and the business as a whole will continue successfully doing business.

Terms such as a commitment to continue manufacturing in a certain area can help preserve your businesses legacy.

We understand the emotional journey of selling a business through first hand experience of starting, growing and selling successful businesses of our own.

Barry Parsons Managing Partner has personally raised over £30m of business debt and equity for his own ventures and would be delighted to talk to you regarding the sale of your business.

If you would like a free consultation with Barry please contact us: 01604 864 353 | info@hhcbs.co.uk
You can arrange a time for us to call you at your convenience here.

There are a number of deal structures available to an owner-manager wishing to sell.

The deal types availiable to you:

MBO/Management Buy-Out
The acquisition of the business by the existing management.

The management team are often the best buyers as they know the business and are usually the best people to take the business forward. If the business is under performing due to poor management an MBI may be preferable.

MBI/Management Buy-In
The acquisition of the business by an outside management team

An outside management team are either found or communicate their interest in acquiring the business. If you are interested in selling and an MBO is not preferable a buyer must be found. The services of a business broker to identify and discreetly approach potential buyers can greatly increase your chances of a successful sale.

Earn-out
A deal is structured with an initial payment with further payment upon the completion of set performance indicators. The business owner normally continues to work with the buyer through a set transition period.

VIMBO/Vendor initiated Management Buy-Out
A management buy-out initiated by the vendors.

BIMBO - management buy-in management buy-out
Combination of outside managers and current employees buying the business. Earn-out.

Cash-out
The Shareholders agree to cash out a shareholder (or shareholders), often by borrowing against the value of the business.

Trade sale/Sale to another company or individuals
The business is sold to another company such as a rival in it’s sector.

AIM -flotation of a company on the Alternative Investment Market
The business owner floats all or a portion of their shares on the Alternative Investment Market.

Sell a business checklist

1. Consider your reasons for a sale.

What will a sale allow you to achieve in your personal life?

1. Choose the right help

If your business turnover is greater then £500k and you do not have past experience of selling businesses utilising the skills of a business transfer agent or a business broker will greatly increase the chances of a successful sale.

1. Understand the process

If you understand the process you can better identify the areas where you need help and will allow you to better present the business to potential buyers. Guide to the process of selling a business

1. Outline your business sale goals

Not only is this important to set goals for your self but it helps define what you expect a business broker to achieve ask; How will you achieve the best possible selling price?

1. Decide on a realistic business valuation

A business is only worth what someone is willing to pay for it. Therefore you should decide what figure will make it sensible for you to sell your business. Be realistic with projections and build a strong case to backup all your forecasts.

Ask your self what are these estimates based on and how can I best portray the earning power of this business.

1. Explore your options

Take a look at the different deal types available to you perhaps your management team could buy out the business, if this is not a possibility the best course of action might be to use an intermediary company to approach the competition confidentially to ascertain if there would be an interest in consolidation.

1. Keep your eye on the ball

Using professional help to manage the sale can allow you to keep your business running smoothly. Selling a business is a time consuming process it is critical you keep the business performing throughout so as not to impair the sale value.

1. Keep calm and carry on!

Most owners underestimate how much of an emotional roller coaster selling a business can be. Your business is likely the culmination of your life’s work and taking criticism about it will be part of the negotiations.

Don’t take criticism of the business personally the buyer will be looking out for their best interests. It is important to reassure the buyer and sell them the business stay positive and see the big picture. If a buyer has an issue the best option is usually to take good note of what they are saying and come back to them later with a strong response. This will stop you getting bogged down in the nitty gritty.

1. Know when to call it a day

Sometimes an agreement cannot be reached, nobody is in the best state to make important business decisions at 3'oclock in the morning. Sometimes the best thing to be done is to call it a day and come back to the table fresh headed. If an offer is below the realistic value you have set yourself and a buyer will not negotiate sometimes the only thing to do is to walk away. In this difficult situation having the strength to walk away can also demonstrate your confidence in the businesses value.

1. Take your time

A fast sale probably isn’t a sale for the best selling price, finding the right buyer for your business will often take time and even with a ready buyer selling a business with a deal value of £1-20m will take at least 3 or 4 months to conclude.

How is a business valued?

There are a number of ways businesses are valued and you will find lengthy explanations elsewhere on the web and in business textbooks. Your accountant will also offer views on value based on the balance sheet or the cash generated by the business as profit.

For selling purposes a broker will look to identify the maximum value by examining in detail the profit and loss account of the business, making adjustments to the profits to reflect non continuing costs and applying a potential industry multiple.

The single most important guide to valuation is YOU.

What do you want as a minimum for your business to make it sensible to sell it?

This is a discussion any broker should hold with you and be candid about your chances of success.

Beware the broker that inflates value expectations simply to ensure you sign up! You should be prepared to incentivise your broker to achieve higher values than your minimum.

Ask your broker ‘how he will achieve maximum value’?

Do I need a business broker?

If you have sold a number of businesses, If you can be dispassionate about criticism of your business, if you can leave your business unattended then maybe yes!

In reality, it is never a good idea to attempt to sell your own business without good advice and education. Remember, selling a business is complex, it requires a range of business skills and is time consuming.

For smaller businesses, (T/O less than £500k) advertising may be the sensible and more cost effective route.

How do I sell for the best possible price?

First you must decide whether you will benefit from the services of a business broker; the answer to that question is almost certainly a resounding yes subject to your business being of sufficient scale.

If you are a smaller business then affording a broker may be a real issue and therefore education about the process is critical. Do not rely on well meaning friends, family or acquaintances unless they have sold a number of businesses. Having selected the preferred route you need to prepare for disposal by preparing an exit plan

What is an exit plan or strategy?

Forward thinking businesses will deploy an exit plan some years before actual disposal. Put simply the exit strategy is a documented project plan covering all key points that will enable disposal in the best possible way and therefore for the best possible value.

An exit plan will address key strengths and weaknesses in the business, will address the target buyers and ensure that succession management is in place.

Hyde House can work with businesses to create an exit strategy designed to maximise the businesses value and greatly increase the chances of a successful completion.