Selling a business is, for most people, a whistle-stop tour of just about every document and financial statement a company could amass over its years in operation. You don’t need us to tell you it is an incredibly complicated process, but, as always, there is a light at the end of the tunnel – provided you have the right information and expertise on your side.
Are Your Finances in Order?
Financial due diligence is, for very obvious reasons, one of the cornerstones of a good business acquisition, which means that anyone seriously considering selling their business will want to have every aspect of their finances in order before looking for potential buyers.
A business with confused or disorganised finances is going to take a lot longer to push through the sale process than a business that has taken the time to dot every ‘I’ and cross every ‘T’. It’s also going to be a lot harder to attract serious buyers, and may mean that you’ve scuppered your chances before even launching yourself off the starting line.
Do You Know What You Are Selling?
There is more than one way to sell a business to someone new. It may be that you are selling shares in the company that owns the business, but it may be the case instead that you are selling the business’ assets – its IP, for instance, along with its stock in trade, customer lists, contracts and goodwill.
Your decision will have a major impact, not just on the buyer, but on you, too. Your options entail various legal implications, and influence your capital gains tax, and you’ll want to know exactly how things will play out ahead of time, rather than burying your head in the sand.
Are the Right Documents All in Place?
Every document, contract, agreement, and restrictive covenant you have signed over the years will need to be passed over to the buyers’ legal team for review. They will need to ascertain, for instance, whether contracts can be reassigned to them, or whether a change like this is prohibited under the original contract.
As you can imagine, everything is significantly easier and more efficient if these documents are organised ahead of time, and ready to hand over to the buyer’s legal team as and when they are requested.
Is the Business Ticking Over as Normal?
Keeping up with your prospective buyer’s requests is, for anyone trying to sell a business, a full-time job in and of itself. Keep in mind, however, that the business needs to continue to operate to its full potential throughout this disruptive time, and that, in order for that to happen, you need to remain at the helm until the sale is complete.
This is why it is unlikely anyone would recommend that you attempt to handle this on your own. Sorting through complex financial statements is a job best completed by a chartered accountant, while the many (many) legal documents that will pass between you and your buyer will be much safer in the hands of experienced corporate solicitors who have seen the process play out successfully many times before.
What Will You Do Following the Sale?
Things don’t end for you the second the final signature is made. There are many things to consider now that will prepare you for the future. For instance, have you talked through the length of the earn-out period – not to mention any option to take shares in the buyer and tax liability? You’ll also want to consider how much will be paid immediately versus deferred to a later date.
Nobody ever suggested that selling a business was a simple, rinse-and-repeat process, but many of us simply don’t realise quite how much you’ll want to know before the sale is made final. Make sure you’ve got the right help on your side, and a well organised filing cabinet.