Selling Your Business

Selling your business could be the most important financial deal you will ever make. Here’s how to make the right decisions.

For many owners, selling the business they've spent years
building up can also be emotionally difficult. And unless you've sold
another business previously, you'll have no experience to draw on.

Is selling my business the right option?

Before selling your business, you need to carefully assess
your reasons for doing so.

You need to consider four key questions:

• What are your objectives as the owner of the business? For
  instance, you might want to realize some or all of your investment in
  the business.
• What are your objectives as manager of the business? You
  might want to retire as soon as possible or prefer to keep running the
  business.
• What are your objectives for the business itself? For
  example, the business might need new investment in order to grow.
• Who else will be affected and what will they want?
  Consider how shareholders, managers and employees -- and even key
  customers and suppliers -- may feel the impact.

Ways to sell your business

Most businesses are sold in a trade sale to another business.
Alternatively, you may be able to find a private-equity buyer. For
instance, a venture capital firm might be prepared to help your
management buy the business.

There are several different sale options:

• Partial or full sale: You may want to
  sell the entire business. Sometimes the purchaser prefers you to retain
  partial ownership and continue to run the business. This can give the
  purchaser confidence that the business will do well.
• Sale of assets: You can sell assets
  such as equipment, intellectual property or your customer list rather
  than selling the business itself. This may be attractive to a purchaser
  who does not want to take on liabilities and obligations. For example,
  the purchaser might not want to take on your employees. You will be
  left with whatever assets and liabilities are not included in the sale.
• Immediate or phased payment: You can
  ask for payment in full when the sale is completed, or you may be
  prepared to accept payment in installments. The purchaser may well
  prefer to pay in installments. But you will be at risk if the purchaser
  cannot make future payments.

Your choices can affect whether buyers are interested and how much they
are prepared to offer. They can also affect the tax treatment of the
sale.

When to sell your business

Selling at the right time can have a significant impact on
the price you get for your business.

If possible, plan ahead so that you can pick the best moment
rather than being rushed into a quick sale. If you plan to retire in
five years' time, it's a good idea to start planning the sale of your
business now.

The general state of the economy and your sector in particular
can have an effect. It's easier for a trade buyer to fund a purchase
when their own business is doing well, interest rates are low and banks
are keen to lend.

The state of your business is a more important factor. Aim to
sell when profits are increasing and look likely to grow further.
Consider the impact of sales cycles or seasonal fluctuations in your
business -- like when you might have fuller order books at a particular
time of year.

Planning well in advance also allows you to groom other
aspects of your operations to ensure your business is as attractive to
buyers as possible. This can enable you to ensure that equipment is
well-maintained, key contracts are in order, and that you are complying
with all legislation.

The detailed timing of a sale may also depend on the tax
consequences, and any forthcoming changes to tax rules.

Choose advisers to sell your business

Experienced advisers are essential for an effective sale. The
right adviser can have a big impact on the success of your sale.

You will need an accountant and a solicitor. The accountant
concentrates on the financial aspects of the sale, such as preparing
accounts for the business. The solicitor focuses on legal issues such
as drafting a sale agreement. You also need to use a specialist tax
adviser to handle business and personal tax planning.

Most businesses also choose to use a specialist corporate
finance adviser. The corporate finance adviser is involved at an early
stage and helps you choose the timing, find potential purchasers, groom
the business for sale and negotiate the sale. The adviser can manage
the whole sale process, leaving you free to continue running the
business.

To find a suitable corporate finance adviser ... locate a
specialist in your area.

Always examine advisers' skills and expertise carefully. You
should look at:

• What experience they have of selling similar businesses
  and how successful they've been
• How they can help you to market the business
• What contacts they have among potential purchasers
• What references they can provide

If you're using a firm of advisers, make sure you feel comfortable with
the people you'll be dealing with on a day-to-day basis.

Of course, you will have to pay your advisers, and many charge
an hourly rate. Alternatively, you may be able to negotiate a fixed
rate for a particular piece of work. Some advisers, particularly
corporate finance specialists, are prepared to negotiate a success fee
as part of their payment -- you might pay lower fees if you don't
achieve your target price.

Source: Evening Gazette.
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