Exiting a business: Six steps you should take to prepare
Are you thinking about selling a business? It’s often a difficult decision that comes with challenges. As well as the practical challenges, there are likely to be emotional ones too. After all, it’s your business that you’ve spent countless hours building up to get to this point. Setting out the steps you need to take as you prepare to hand over a business can help you stay focused and increase value.
So, what essential actions should you be considering?
1. Timing the sale: Deciding that you’d like to sell a business is just the first step, the first question to ask is ‘when?’ Depending on the nature of your business, there may be natural high points each year, if your business is seasonal, for example. As a result, timing could affect the number of interested parties and offers you receive. It’s also worth looking at what’s happening on a wider scale within your industry too.
2. Getting the financials in order: It should come as no surprise that potential buyers will be keen to delve into the financial side of the business. Make sure your profit and loss accounts, balance sheets and future projections are up to standard. Ensuring they’re as detailed as possible can help the buying process go through quicker.
3. Organise paperwork: It’s not just the accounts and balance sheets potential buyers will want to see. Keeping other paperwork, such as contracts, organised and readily accessible when needed is just as important. Anything that helps potential buyers get an overview of your business and why they should be interested can be useful.
4. Creating a ‘how to’ manual: You might know how your business runs inside out. But even those familiar with the industry could find your processes perplexing. A ‘how to’ guide that sets out how to keep things running smoothly can be invaluable for potential buyers. Detailing how everything works is also an excellent opportunity to consider if you’ve been working as efficiently as possible. Looking at how your firm operates from another perspective could highlight where you can streamline and improve.
5. Considering potential buyers: Do you know who might be interested in buying your business? Defining the buyer gives you an opportunity to organise paperwork and market the sale in a way that appeals to them. A buyer might be a competitor, businesses expanding into new sectors or an entrepreneur that wants a head start, for instance. These different buyers would all be looking for something different within your business. Taking some time to think who your business is likely to appeal to can speed up the process.
6. Take a step back: Up to when you start to consider selling your business, you’ve probably put in an enormous amount of work, effort and expertise. However, if you’re a key asset to the success of the business, it could actually hinder the sale. After all, a buyer isn’t going to want to purchase a firm that isn’t going to be as profitable once you hand over the reins. You need to take a step back and demonstrate that the business can still run as efficiently when you’re not there.
Planning for the next stage of your life
When you’re selling a business, it’s often the case that business owners focus on this. But planning for your own future is just as important. Taking time to define what you want to achieve after the sale of your business and the lifestyle desired can mean making decisions that are right for you.
By starting with aspirations after selling a business, you can build up a picture of how much money you will need to achieve this. As a result, taking this step as you prepare to sell can help you reconcile the figure with how much your business is worth. It can help you understand what’s realistic and inform decisions. You may decide to accept a lower offer than your original valuation, for instance, knowing that it’s enough to fund aspirations rather than hold out for a higher price that could take months to come, if at all.
If you’re in the process of selling a business and want to understand how it’ll affect your financial future, please contact us. Our goal is to give you confidence as you embark on the next journey, whether you plan to kick back in retirement or embrace entrepreneurial opportunities again.
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