For Sale
Prepare your business to sell
Thinking of selling your business one day? Even if you’re not ready yet, if that’s something you have in mind at some time in the future, the businesses that get the best price are rarely the ones that go on the market overnight. They’ve been quietly getting ready for years.
Start early
Three years is the bare minimum. Five is better. A buyer will want to see a track record, not a business that’s suddenly been tidied up for their benefit. That means resisting the temptation to ‘cook the books’, but thinking strategically about how and when you draw money from the business in the run-up to a sale.
Get your contracts in order
Client relationships built on a handshake feel solid until you try to sell them. If your biggest contracts are running on gentleman’s agreements rather than signed contracts, a buyer has no guarantee those relationships will survive a change of ownership – and neither do you. Make sure agreements are current, not quietly rolling over unrenewed.
Know where your income comes from
If most of your revenue sits with one or two clients, that’s a red flag for any buyer. Your main contact could move on, or a client could be acquired by a company that brings in its own suppliers – and your income disappears with them. A spread of income streams makes a business far more resilient, and far more sellable.
Think about your people
Buyers look closely at your team, not just your numbers. Do you have succession planning in place for your key roles? Is there a plan for staff development and progression, or does the business rely on a handful of experienced people nearing retirement, with no one ready to step into their shoes? A visible skills gap is a valuation risk.
Present profits properly
Owner-directors often take a small salary and larger dividends for tax efficiency – sensible for now, but it understates profit on paper, since dividends don’t appear in the profit and loss account. Before a sale, profits should be adjusted to reflect a commercial salary for whoever is actually running the business, giving a buyer a true picture of profitability. Knowing your gross profit margins in detail is part of the same exercise.
Understand valuation – and goodwill
Valuations vary by industry, but are often based on a multiple of profits. Ultimately, though, a business is only worth what someone is prepared to pay for it.
Goodwill tied to you personally is far less valuable than goodwill tied to the business itself – its brand, location or systems. Think of a café by a lake: people come back for the spot, not just the owner.
Look the part
Quarterly management accounts, rather than once-a-year figures, signal to a buyer that you’re on top of your business. It’s a small habit that makes a big difference to how professional – and sellable – you look.
Get ready sooner rather than later. Talk to us about preparing your business for a future sale.
