Looking to Sell Your Business? Preparation Is Key 

Having worked hard to build your business you might now be considering selling and realising the value you have created. However, many businesses that go to market fail to achieve a successful exit.  Crawfurd Walker, our Chief Revenue Officer, has worked with many businesses to get them ready for exit. He shares his tips on preparing to sell a business.   

 

Preparing a company for sale is crucial to maximise value, ensure a smooth transition, and minimise risks during the process. Without properly preparing your business for sale you may well find that not only is there a huge valuation gap between what you expect to receive and what a potential buyer sees as a fair market price, but the potential buyer may well walk away altogether, causing the deal to collapse.  At elephants child, we’ve worked with many businesses who have tried to sell, but initially not found a buyer, or not been able to achieve the price that they are looking for. 

Depending on a wide variety of factors it can take years to prepare a business for sale but those owners that prepare well will not only optimise value but also achieve better deal structures. It is therefore crucial to work with an experienced team of advisors to not only help you prepare but to take you through the sales process. 

Some reasons why preparation is essential include: 

 

1. Maximising Business Valuation

  • Enhancing Financial Performance: Potential buyers closely examine financials. Preparing allows you to improve profitability and address any inefficiencies, which can increase your company’s valuation.  
  • Addressing Liabilities and Assets: Resolving outstanding debts and clarifying asset ownership makes the business more attractive, as buyers want to invest in a company without unexpected financial burdens.

 

2. Attracting Qualified Buyers

  • Presenting a Professional Image: A well-prepared business with organized documents, clear processes, and professional branding appeals more to buyers and shows that the business is primed for success.
  • Reducing Deal-Risk Factors: Buyers seek certainty, and a prepared company presents less risk of unforeseen issues, making it easier to attract high-quality buyers willing to pay a premium.

 

3. Streamlining the Due Diligence Process

  • Minimizing Delays: Sales often stall or collapse due to missing information or unaddressed concerns. Organizing documents, contracts, and financial records in advance helps prevent these delays.
  • Building Buyer Trust: When a business has well-documented financial and operational records, it demonstrates transparency and builds trust with potential buyers, increasing the likelihood of a smooth sale.

 

4. Ensuring Business Continuity During Transition

  • Documenting Processes and Key Knowledge: Creating guides on operations, customer relationships, and employee roles makes the transition smoother for the new owners and reduces disruptions.
  • Preparing Key Employees: A solid succession plan ensures that essential staff are motivated to stay through the sale, preserving the company’s value and knowledge base.

 

5. Optimising Tax and Legal Strategies

  • Reducing Tax Liability: Structuring a sale strategically can minimise tax consequences, benefiting you financially. Preparing allows time to consult with tax and legal advisors.
  • Ensuring Legal Compliance: Many companies face legal issues only when they prepare to sell. Early preparation helps address compliance issues, reducing legal risks in the transaction.

 

6. Maximising Personal and Business Goals

  • Clarifying Personal Objectives: Preparation helps you define what you want from the sale (e.g., financial gain, company legacy), enabling you to structure the deal to align with those goals.
  • Enhancing Legacy: For owners who value their company’s impact, preparation helps ensure it continues to thrive and aligns with the new owners’ intentions post-sale.

 

In short, preparing a company for sale is an investment in its future value. Using trusted advisors can help ensure the deal concludes successfully but it also enables you to attract a strategic buyer, command a higher price and a better deal structure. It will secure a smooth transition while protecting both your interests and the business itself. At elephants child, as well as working on the practical aspects and offering professional advice, many of our team have also been through the process with their own businesses so can offer empathy and a sounding board for business owners navigating an exit.  

 

What’s your business currently worth? Find out via https://elephants-child.co.uk/business-valuation/