How to maximise value when selling your business
Updated: 5th June 2016
There is a multitude of reasons why entrepreneurs launch or buy businesses, but there’s almost always one common goal when it comes to the sale: maximum financial return.
No matter how well your business is performing, however, there are more elements than this in the equation that determine much you will pocket when the deal is done. Here are four factors which can help you get maximum value from the sale of your business.
Market to the right buyers
The types of buyers your business may attract can broadly fall into four categories. Aiming your sale at the right target market can ensure you get a healthy level of interest and command the best price.
You may be interested in selling your business through an MBO or to passing it on to family members. This will give you some say in succession and ownership after your departure, but is likely to net you the smallest windfall as there is little or no competition to drive the price higher.
You will likely secure a higher price by putting your business on the open market and accepting bids from entrepreneurs, investors, or through another business interested in a merger or acquisition.
In some situations you may be able to publicly list your company. Though not all businesses are suitable, in the rare cases it’s used as an exit strategy it results in the highest sale price. Not only does this type of sale attract the widest number of investors, but you’ll have to conform to all manner of stock market rules regarding transparency, which is an attractive aspect for buyers.
Make your business look its best
Whichever route you opt for, you’ll want to make your business look it’s best to tempt the buyer into offering the highest price. This broadly this includes:
- Selling when profits and growth are trending upwards
- Have creditors and debtors under control
- Keep staff turnover low and ensure the business can thrive once you’ve departed
- Get your patents, leases and legal matters in order
- Don’t over-rely on key suppliers or customers
- Make detailed financial documents from the last three years available for due diligence
Efficient withdrawal of funds
Unfortunately, the price your business sells for is not the same amount of money you will be able to walk away with. The taxman will make sure of that.
Before settling on a price or entering into a sale, talk with your advisor about how much your business will need to sell for to achieve the payout you require. There are various strategies which will help reduce your tax burden, but some of these will require thorough advance planning.
There may also be alternatives to cash lump sums that prove more efficient for both you and the buyer. As an example, in some cases it’s possible to agree a lower price using a payment method that ends up with both parties getting better value.
Be prepared to wait
When it’s absolutely required that you sell, your hand is weakened at the negotiating table. Conversely, you substantially improve your chances of securing the best possible price if you’re happy to walk away and wait for a more appropriate offer.
Selling up is both one of the most complicated and most important aspects of business ownership. If you’re plotting a sale, soon or at a future date, talk to one of our advisors who will talk you through the process and help guide you to securing the best possible returns.
Emma qualified as a Chartered Accountant in 2002. Since then, she has specialised in corporate finance, joining BTG-McInnes in July 2006. She has extensive experience in advising the SME market on fundraising, re-financing, acquisitions and disposals, across a broad range of industries.