6 things your client needs to consider when selling a business

Selling a business is a complex procedure where mistakes can be costly. It’s important, therefore, to give careful consideration to all stages of the process and to prepare the business as far in advance as possible.

To help meet objectives and move on with the highest possible value achieved, here are six things to consider when selling a business.

1.      Tax

It’s vital to understand the tax implications of selling a business so the seller doesn’t overpay. Capital Gains Tax (CGT) becomes due on the sale of a business and your client may be liable for corporation tax if their business is a limited company. Capital Gains Tax may be offset by claiming Business Asset Disposal Relief if they are eligible.

2.      Business valuation

Obtaining an accurate and realistic valuation for the business is key to success. If the valuation isn’t reliable – it may be too high, for example – it will struggle to sell. If it’s undervalued, on the other hand, it means the seller will lose out on profits and won’t do justice to the hard work they have put in.

Our partners, Selling My Business can offer you a business valuation that’s reliable and easy to access – please get in touch to find out more.

3.      Confidentiality

Your client may not necessarily want their business sale to be public knowledge given that sensitive commercial information might fall into the hands of their competitors. They may also prefer to keep the sale confidential from their employees and other stakeholders to avert the possibility of someone trying to sabotage the process.

Selling My Business ensure confidentiality by drafting a clear and comprehensive non-disclosure agreement (NDA) that can be sent to interested parties before any information is released.

4.      Due diligence

Due diligence is a stage of the business sale where the prospective purchaser and their professional advisors scrutinise the information provided. This typically includes financial and legal, and information on the business’s assets, liabilities, and cash flow.

At this stage, the buyer is trying to establish whether the price they’re being asked to pay for the business is reasonable. It’s vital, therefore, to present clear and reliable facts, figures, and information that’s been gathered by their professional advisors.

5.      Warranties and indemnities

The purchaser will want to ensure they don’t suffer any unexpected financial losses if the business doesn’t perform as expected. They use warranties and indemnities for this purpose.

Your client will want to limit their future liability, which is why it’s crucial to obtain expert advice on the warranties and indemnities demanded by their buyer. The team of experts at Selling My Business can negotiate with the purchaser on their behalf to protect their interests and ensure that their future liability is minimised.

6.      Who will sell your business?

Selling a business is potentially one of the most significant transactions your client will undertake, so it makes sense to obtain professional guidance and support. They should in include their professional advisors such as their accountant and solicitor, and it’s highly advisable to appoint business sales brokers with experience in their industry.

The team at Selling My Business has more than 60 years of experience in conducting successful business sales and can provide the expertise and reassurance your client needs at this time.

To find out more, click here.