Many successful business owners reach a point in their lives where they ask themselves, what’s next? Accompanying that burning question is what should I do with my business? The answer may lie in selling the business. To maximize the chances of a successful transfer to new hands, much work needs to be undertaken in advance of the sale. This article recounts points a business owner ought to consider to ensure the smooth successful transition of a business into new hands.
For a business to be sold, clearly a Purchaser must be found. Possibly a family member or an employee may have a desire to own the business. Alternatively, a Purchasers may lay outside the company. Determining who is a prospective Purchaser is the first step a business owner needs to take when formulating their plan to sell.
Businesses are more attractive to potential purchasers when there are zero issues to deal with. Hence any outstanding issues a company has should be remedied ideally before the market is told the business is for sale.
A business sale will require a team of professional advisors to be established. Usually the team includes the company accountant, followed by the independent trustee if the shares of the business are held in a Trust. Secondly, a lawyer who is skilled in business dealings should be chosen. A registered valuer may also need to be selected to determine the value of the business, along with a business broker if the business is to be sold on the open market.
Businesses don’t exist in a vacuum. They are usually built by implementing specific strategies and particular processes, using key suppliers and servicing customers. Whoever purchases the business will need to be familiar with these elements in order to successfully take up where you leave off. Full documentation describing these components will aid Purchasers so business owners should try to document their business and its pertinent elements in advance of the sale.
It’s important business proprietors know the value of their business in order to set a fair and reasonable price. Identifying this is the job of an independent valuer. Accordingly, a valuer should be selected. This professional should be familiar with the industry your business operates in as well as what your business actually does as otherwise the valuation they determine may be skewed.
Business sales frequently aren’t a cut and dried affair. Often they are done piece-meal. Additionally, you as the vendor may need to stay working in the business to help the purchaser understand how the business operates, to introduce them to existing clients, to give the market the company operates in confidence its business as usual despite new hands. Having a clear idea of what you are willing to do to aid the purchaser will help in evaluating who is a good fit purchaser as your requirements can be communicated to potential parties early on in the process.
Selling a business can be a complex affair. Accountants should be consulted early in the process to identify potential tax implications. Tax lawyers may need to be consulted as well to ascertain answer to issues raised. Lawyers will need to be briefed to ensure the business sale and purchase agreement contains appropriate terms. Included in the lawyers work should be a review of the company’s constitution and any shareholder agreement that is in existence to ensure the sale process is correctly followed from a legal perspective.
Getting a business match fit and ready for sale can take time. That is why business owners should deal with issues as they arise and document what their company does and how it does it, long before the decision to sell is made. Some forward planning never goes astray when it comes to business sales. For this reason, we recommend you let your Lion advisor know at Greenlion if you think you may be selling as we can be invaluable in the process.
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