Thank you to Tom Freedman from Rathbones for providing us with this guest blog as part of People Month at techSPARK.
The key to preparing a business for sale is ensuring you have enough time to drive value in a way that can be evidenced through the sale process. If you wait until you receive an actual offer to buy, you are unlikely to have the time to optimise your exit value. The time to start thinking about this is now, even if that ‘phone call’ is five or more years away.
Our Seven Top Tips To Get Your Business Ready To Sell.
The following are the key steps and questions you should consider to ensure your business is in the best shape possible pre-sale.
1. Tackle The Hard Questions With Co-Owners
While you’re fundamental to your business right now, to maximise sale value you’ll need to demonstrate that its success isn’t exclusively tied to you.
To do so, ask yourself:
– Do you have a management team in place that inspires confidence and can drive the business forward?
– Are the key director roles suitably defined and fulfilled? Do you need to recruit or can in-house talent be developed?
– Is there a succession plan in place and are all involved parties fully bought into the process?
– Are you emotionally ready to break the attachment with the business?
– Are you prepared for the tough journey and ready to tackle ‘deal fatigue’?
2. Create Value and Drive Growth
Key questions when considering value:
– Is your business non-owner dependent?
– Can you demonstrate predictable revenue?
– Does it have scalable products and services?
– Are there attractive margins?
3. Use Financial And Management. Reporting To Ensure That Your Business Remain On Track
Many businesses have effective income and expenditure reporting, but these can be historic. Are effective reporting and controls in place to ensure that your ambitious growth plans are being followed?
Do not underestimate the intensity of a third party analysing in detail any variances as you pass through multiple month ends in the sales process.
4. Risk Management
Business risk comes in many forms — such as leadership changes, financial challenges, market shifts, supplier or customer issues, tax, and regulatory concerns. A comprehensive risk register, assessing both probability and impact alongside mitigation strategies, is crucial in the sales process.
Demonstrating how these risks could affect your business and the steps taken to reduce their impact, including solutions like specialist insurance, strengthens your position. Our financial planners can advise on cost effective structures to make risk management as smooth as possible.
5. Prepare For The Due Diligence
It’s important to ensure you have relevant documentation, including incorporation papers, share certificates, property deeds, contracts, and intellectual property records, all updated for due diligence. Resolve any litigation beforehand, as unresolved disputes can create uncertainty and affect the sale price. Our financial planners can advise on strategies to minimise this impact and help you achieve a successful sale.
6. Consider Your Personal Tax And Financial Considerations
When selling your business, consider both personal and business financial planning to ensure surplus cash is managed tax-efficiently, balancing reinvestment needs with your personal goals.
Our dedicated financial planners can help you navigate complexities, including Capital Gains Tax (CGT) and reliefs such as Business Asset Disposal Relief (BADR), ensuring your business sale supports your long-term goals.
7. Don’t Leave It Too LateÂ
Regarding tax reduction, it’s important to recognise that last-minute pre-sale planning is unlikely to provide substantial savings. Strategic tax planning should be implemented ahead of time, ideally as part of your ‘readiness for sale’ strategy.
This information should not be taken as financial advice or a recommendation. Tax treatment depends on your individual circumstances and may be subject to change in future. Rathbones do not offer tax advice. We recommend you speak to a tax adviser if you are unsure.
