Your Questions
We understand that in 90% of cases people sell their businesses to retire and that the most important question is not, "How much will I get for my business when I sell it?" but rather "How much income will I derive from investing the sale proceeds?".
The first thing we do is assess how much monthly income you and your family need in retirement. We then work backwards, taking account of some careful tax planning to get back to the 'big number'. In other words, the price we need to get for your business, as a minimum.
The following shows the steps involved in a sale and gives an idea of timing for each stage:
Start of process - Appointment of Advisers
Month 1 - Preparation of information memorandum and agreement of potential purchaser list
Month 2 - Start marketing the business
Month 3 - Initial meetings with potential purchasers
Month 4 - Receive indicative offers
Month 5 - Draft heads of agreement
Months 6/7 - Completion
It may sound strange but often it's when you don't need to sell! Time constraints and poor preparation can suppress the value of your business. And so can weak management structures, lack of control of business practices, and poor performances levels. This means choosing the right time to sell is crucial.
On average it takes 6 months to sell. A potential buyer will look for a profitable track record, positive cash flows, a good customer base, strong supplier relationships and sound financial records.
It's important to review the state of your business as early as possible to spot any potential weaknesses that a buyer may find - preferably 12 months in advance of a proposed ssale process. This gives you time to put the issues right or mitigate them as much as possible. Finally, aim to reduce the risks facing potential buyers as early as possible.
Plan the sale well ahead of time. This will allow you to have made contingency plans for the business to be maintained at current levels whilst you concentrate on the sale proceess.
Use an adviser who can project manage efficiently. Our teams are experienced at taking the strain from vendors.
The sales process is time consuming and exhausting - be prepared.
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Should I sell to the management team?
In some cases this might be your only option. The following should be taken into consideration:
Advantages
Ease and speed of completion
Greater security for the finance not paid at completion
News of the sale may be kept confidential for a longer period
Acts as an incentive for the team to work hard in the year prior to sale
Disadvantages
You could receive a potentially higher price from an external party
Relations may become strained if negotiations are difficult
It is very rare to be able to leave your business at the point of sale. In 90% of cases you will be required to provide a handover period of 6 to 12 months. The way this is usually structured is that you will agree to a maximum number of days per month, which reduce as time goes by. Normally after 6 months you may only be required at the end of the phone.
Tax is a highly complex area that the government is forever changing. Your Corporate Finance adviser should have the relevant tax experts within their team who know the best way of minimising how much tax you pay on the consideration you receive. Once that is invested, they will also be able to minimise the tax you will pay on your investment or retirement income.
The secret is to appoint an adviser as early as possible - in the ideal world 2 to 3 years before you intend to sell your business. This provides enough time to get the business in its best possible shape in readiness for the sale and to complete any presale tax or investment planning.
Your corporate finance adviser will be able to advise you on who else should be on your teamand recommend suitable lawyers, tax advisers and investment experts as required.
Fees are contingent in the majority of cases, with a success fee (usually a percentage of the value achieved for your business).
