Top Tips
Don’t Sell Out When Selling Up
Selling a business is often the culmination of years of hard work, determination and perseverance — getting the process wrong can waste years of concerted effort.
In order to help owners and managers avoid some of the pitfalls associated with selling a business and ensure that they get it right first time, David Robertson, Chief Executive of leading finance firm Bibby Financial Services has developed a series of top tips.
- Get a game plan — Ensure that you plan the sale of your business at least 18 months in advance. Good forward planning will help you maximise the value you draw from a sale.
- Set out your goals — Be very clear on your reasons for selling up and write down your specific objectives. These may include: selling by a given date at a target price, securing the jobs of your employees or minimising personal tax liabilities.
- Seek advice from the specialists — Choose your advisers carefully, they should ideally have expertise in selling businesses. A combination of specialists (e.g. a corporate finance adviser, a taxation expert or corporate lawyer) will provide optimum support.
- Get groomed for success — Do everything you can to show the business in the best possible light. This may include: making sure assets are in good condition, information systems are running smoothly and formalising verbal agreements with customers and suppliers.
- Put your finances in order — Improve your working capital by exercising tighter credit management and stock control practices. Make sure that provisions for bad debt are realistic and ensure that any irregularities are accounted for.
- Craft the Memorandum — The Sales Memorandum is the initial marketing document sent to potential buyers. It should make the business sound attractive, demonstrate its potential and be a source of hard facts.
- Target potential buyers — Compile a list of no more than 30 possible buyers and approach them anonymously to gauge interest. Ask your adviser to draw up a confidentiality agreement for interested buyers to sign.
- Weigh up the offers — Carefully consider the options. How will the purchase be financed? What will your responsibilities and liabilities be? How long will completion of the sale take? How will the business be run in the future?
- Get the best deal — Play off one potential buyer against another to encourage higher bids and be prepared to negotiate with potential buyers.
- Make it official — Quickly agree Heads of Terms with the buyer. The buyer’s offer will be subject to further due diligence (usually carried out by the buyer’s advisers).
David Robertson, Chief Executive of Bibby Financial Services said:
“Making the decision to sell your business is a huge step, emotionally, as well as professionally. This is not surprising given that building a profitable venture from scratch can take many years of hard work and commitment.
“It is vital that you go into selling your business with your wits about you. It can be a very difficult, time-consuming process and there is a real danger that your business performance can suffer at the exact moment it is under scrutiny from potential buyers because you are distracted by the sale”.