When you are busy running the business it can be difficult to spend time considering your long term objectives. You might have a specific date in mind for when you want to stop being involved in the business (either because you plan to retire or because you have another project to embark upon), but have you given careful thought to how you are going to leave? 

The idea of selling your business can be daunting, but if you consider and act on each of the following points, you’ll be taking a step in the right direction:

Who are the key people?

If the business cannot survive without you, a potential buyer will take this into account when calculating the value of the business, so make sure that the key business relationships are transitioned to other employees and management. A strong management team not involving those who want to leave will make your business more attractive to a potential purchaser.

Electronic or paper files – or no paperwork at all?

You will need to show a potential purchaser what terms apply between the business and each of its customers and suppliers – can you find copies of the contracts or the terms and conditions applicable to all of them? If all the business records are in your head, it’s time to download that information: put the back office together by organising the filing cabinet (virtual or physical) and test that someone else in the business understands it all.

If you have a limited company, are the statutory books (registers of members etc.) up to date and do they reflect the company’s entire history? Have all the employees/consultants signed their employment/consultancy contracts? Are the employment policies up to date? 

A legal audit of your records and contractual arrangements before embarking on the sale process could save you a headache later when you are negotiating the deal with the buyer and trying to do the day job at the same time.

Your financial history: It’s time to dig out your records

Any buyer will want to thoroughly investigate the financial history of the business, so you’ll need help answering tax and accounting queries. Good tax and accounting advice is vital. 

How the sale is structured will often largely depend on tax considerations for you, so you’ll need a tax adviser who has experience of selling businesses. Their advice might be to sell your shares (if your business is a limited company) or to sell all or the majority of the business and assets, and they may advise that you are entitled to claim Entrepreneurs’ Relief on the sale proceeds. A good tax adviser working with you and your legal team from the outset will ensure the transaction is structured to suit your personal tax position.

Buyer’s investigations

When you have an interested buyer and the parties are bound by confidentiality obligations, the buyer will raise enquiries about the business. 

A prudent buyer will send separate financial and legal requests for information tailored to your business. Responding to these requests takes time and, as you probably won’t want to let your employees know that you are planning to sell, can be a difficult juggling act for you. But this is where the work you do in advance will pay off: if your records and contracts are in good shape and you have your financial and legal advisers ready, it will be easier to collate your responses to the buyer’s questions.

Expert legal advice can help steer you through the process.