How to plan a future business sale
As the owner of a business with a view to passing on the role down the line, you may choose to begin planning the sale of your business in advance. Forward planning is instrumental if you’re working against the clock as you plan to retire or wish to increase the market value of your business ahead of the sale. An exit strategy which takes the route of a business sale must be strategically fleshed out so the transition between owners is seamless.
The Selling My Business team explain the benefits of planning a future business sale in advance and how in advance exiting business owners must take to the drawing board to plan their exit strategy.
- Previous sales and acquisitions experience
- Sector specialisms and average success rate
- Sales value expectations and growth potential
Why should I plan a future business sale in advance?
Planning the sale of a business in advance can be greatly beneficial for several reasons.
As with any major decision, advance planning gives you more time and control to sketch out the finer details and the road to your end goal. It provides time for contingency planning if any unexpected circumstances threaten the sale of your business. If you wish to fast forward or rewind your business sale plans due to mitigating factors, such as economic conditions, advance planning can help prepare for such events.
The benefits of planning a business sale in advance include:
- Retirement planning – If you want to sell the business and retire, plan the sale ahead of time to secure a buyer in time.
- Succession planning – Plan a business sale in advance to give you ample time to find a successor that is suitable for the business and meets your criteria. The decision will shape the future of your business and determine its potential to continue to generate a profit under a new owner.
- Financial planning – Advance planning provides sufficient time for financial planning. Company restructuring may be pursued to increase the efficiency of the business, trim outgoings, and boost cash flow. Tax planning is also essential when you structure the sale of the business.
- Tie up loose ends – Plan a business sale in advance to give you time to get your affairs into order. If the accounting records of the business are out of date, this gives you enough time to brush up on them, including cash flow forecasts which will assist your sale. If there are outstanding invoices, you may use this opportunity to collect debts and settle any disputes.
- Build value - The interpretation of ‘value’ is different for all business owners. While it may represent monetary targets for one owner, it may mean reputation to another. Give yourself time to build value so you can generate a greater return from your investment as buyers will be willing to pay more for a business that is worth more.
You may set yourself targets to achieve ahead of the sale, such as a new record for turnover, rate of returning customers, organic website traffic or the number of employees. You may also consider raising the standards of your physical premises if they require a refresh.
When should you start to prepare to sell your business?
There is no hard and fast rule for how early you should begin planning the sale of your business, but your best bet is to factor in enough time to achieve your targets and prepare the business for sale which may require a number of years. It’s also wise to decide on the best time to sell your business if markets are picking up or there’s a particular demand for your type of business.
Use this period to seek professional support from a business transfer agent on how to best plan the sale of your business and secure a buyer. You may speak with your accountant or a tax expert on how to structure the sale so that it is tax efficient and ready your solicitor for the sale.
For more information on how to start to prepare to sell your business, speak with a business transfer agent at Selling My Business – we can also value your business to calculate its market value.
