7 practical ways to get your business sale-ready
Selling your business is one of the biggest decisions you’ll likely make as a business owner, and one that requires careful planning.
Even if you don’t expect to use your exit strategy for many years, it’s worth thinking about the plan early so that you can ensure your business is in the best possible shape when you do decide to hand over the reins.
Here are seven steps you can take today to start making your business a more attractive proposition for potential buyers whenever you decide to sell.
1. Create a succession plan
Even if your potential buyer plans to be heavily involved in running the business after they have bought it, it is important that operations can continue smoothly without you to oversee them. Otherwise, it could require a lot of work and upheaval from the new owner to keep everything running after they have bought the business.
Avoid this problem by taking the time to assemble a senior management team who can run the business smoothly and efficiently without input from you. This will be invaluable for making the transition as easy as possible for your staff, and will also reassure potential buyers that the business won’t require too much hands-on work from them.
2. Improve your cash flow
Cash flow is the lifeblood of your business, and it is one of the first things a potential buyer is likely to look at.
As well as keeping tabs on your monthly cash flow, schedule some time at least once a year to:
- Review your payment terms
- Build up emergency cash reserves
- Increase prices if needed
- Reassess expenses to see if you can cut running costs.
Following through with each of these steps will ensure you have a healthy cash flow that appeals to potential buyers.
3. Clear existing debts
Clearing debts is an important part of managing your cash flow, so you may already be in the process of doing this before you begin thinking about selling your business. However, it plays an equally significant role in the valuation of your business.
Having a large amount of debt could mean that you receive lower offers from buyers to compensate for it.
So, if you do have debts, it might be worth putting a plan together to begin reducing it now, so that when the time comes to sell the business, your finances are as attractive as your USP.
4. Upgrade your systems and processes
It’s easy to get stuck in a rut with your systems. But investing in upgrades to suit your needs as a growing business is crucial for the smooth-running of your operations. Don’t forget to include cybersecurity in this, since cyberattacks can be costly and stressful for everyone in the business.
Similarly, ensuring you have well-documented processes that are reviewed and updated regularly is all part of keeping your business compliant as well as efficient.
When both your online systems and documented processes are up to date and suitable for the size of your business, it could attract more potential buyers and even a higher offer.
5. Decide how much is enough
This might be one of the most difficult parts of planning your exit strategy because it isn’t just a question of how much the business is worth: it’s also about what you will need from the sale to ensure your own financial stability in the future.
Begin by considering what you want to do after selling your business. Will you retire, or do you have another project in mind?
When you know this, calculate how much you need to be able to fund the lifestyle you want. This is where consulting a financial planner could add real value, as they can use sophisticated cashflow modelling software to establish how much you will need to take away from the sale to be able to follow through on those goals and dreams.
With this information, you can confidently accept the offer that meets your needs. It means you can walk away with the money you need now rather than working for years to achieve a higher sale price that you might not even need to fulfil your goals.
You will also understand whether it would be worth postponing the sale for a few years to secure a higher price tag if it means you will be able to do everything you want to do afterwards.
You can learn more about how to decide how much money is enough on our website.
6. Consider the tax implications of the sale
Taxes can take a large chunk out of the proceeds of the sale of your business. This can have a significant impact on the previous point – understanding how much is enough when considering how much you can sell the business for.
As well as considering the lifestyle you want to have after the sale, and the value of the business, take some time to plan out the tax liabilities that you will have.
7. Consult with a professional
Selling your business is a big step, and it’s not one that you need to take alone. By consulting with a financial planner, you can make sure you tick all of the boxes, sell the business for what it’s truly worth, and have peace of mind that you can achieve your next steps in life.
Get in touch
If you’d like to speak to someone about getting your business sale-ready, we can help. Say hello to us [email protected], call us 0161 541 2826 or submit a contact form on our website.
Please note
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.