Is there a RIGHT time to sell your business?
Are you thinking of selling your business, but you don’t know if you should or shouldn’t?
Selling your business is an emotive decision that should never be taken lightly.
Having invested a great deal of time and energy into its success, it may seem crazy to consider offloading it. But there are a wide variety of reasons why you, as a business owner, might want to sell up.
Should you ever find yourself in this position, it’s important to remember that selling a business is a difficult process which can take months to complete. From preparation and valuation to closing the deal, it’s a stressful time for everyone involved.
In my role as an accountant, I have prepared financial statements so that business sales can progress smoothly. I’ve also helped business owners understand the tax implications of selling up.
In my experience, getting an accurate business valuation is the most important thing you can do when selling your business. Get this wrong and you may struggle to even find a buyer.
Once you’ve settled on the right price, timing is everything.
Before deciding on a suitable timescale, it’s important to look at…
The most common reasons why a business owner might want to sell up
Shareholder disagreement
If key shareholders can’t resolve a disagreement, selling some or all of the equity might be necessary.
Business in demand
If there’s strong buyer demand and you’re offered a price that’s too good to turn down, why wouldn’t you sell up?
Relocation
It is sometimes possible to relocate a business, but when that’s not an option some owners decide to sell up and move on. Patience is key. If you’re in a rush to leave, it could affect the valuation and final sale price.
Poor performance
It’s no fun owning a struggling business. If you do decide enough is enough, there’ll always be an entrepreneur who thinks they can bring new energy (and profits) to the business. With this type of sale, it’s important to maximise the final value.
Time for change
Entrepreneurs are always on the hunt for new opportunities. If you want to invest your time, energy and resources into building another company you may have to sell your biggest asset (your business) to do this.
Boredom and burnout
Tiredness, boredom and burnout are three of the most common reasons why people sell up. If you’re in a rush to avoid the daily grind of managing a small business, this will impact on final market value.
Ill health
Unfortunately, this is a common reason for selling a business – especially ones which are heavily reliant on the owner. If this is the case, act as fast as you can to get the best price as soon as possible.
Capitalisation
Business owners who have spent years of hard work growing a successful business often want to sell up simply to release their capital. There’s nothing wrong with this approach – as long as you know the business’ true market value.
Divorce
A married couple with joint ownership of a business may be forced to sell up as part of a settlement. Resolving this quickly could negatively impact the price you achieve.
Retirement
Retirement remains the most common reason for selling a business. Fortunately, this avenue usually provides you with plenty of time to plan an exit strategy – and achieve the maximum sale value.
When your company is profitable but lacks clear successors, a management buy-out or third-party sale might be the best option. According to research published by the Guardian, more than 80,000 solvent businesses with owners aged over 60 and turnover of less than £10m are wound up each year – when they could have been sold. Don’t let this happen to you!
How to decide whether the time’s right for you
If you want to get the best price for your business, you need to start putting sale plans in place months before you intend to put it on the market.
Being able to produce up to three years of accurate accounts and tax returns will allow you to maximize your return.
If possible, don’t wait until your business is on the decline before deciding to sell up. Sell at your peak or when market conditions are optimal to maximize your company’s value.
Before deciding if the time is right to sell your business, consider the lifestyle it has provided for you and your family. You may be sick of working long days, but can you replace the income from your business if you sell?
If you lose that income stream and any benefits, do you know how it will impact your lifestyle? If it’s not a future lifestyle that you will enjoy, you may decide that carrying on at work is the most sensible decision.
And ou receive a lucrative offer, you could negotiate a consultancy role with the buyer for a set period post-sale. Often, this can help to increase the value of a company.
With the right preparation, selling your business can be the successful culmination of a lifetime’s work. But ultimately, whether the time is right to sell depends on you and your personal circumstances.
Proper legal and accountancy advice can secure a sale that ensures financial security or funds for your next venture.
Read our article about ‘All is not IHT Lost’ here.
Find out more about how donating to charity can help your business.
