Getting your ducks in a row
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Published: 23 Jul 2020
To put yourself in a strong position, the process of selling your company should, depending on the size, start between 1 to 5 years before you wish to find a buyer.
Planning the sale of your company
Planning the sale is most important and sometimes more important than its execution.
Essentially you need to 'get all your ducks in a row', whether it be staff, systems, receivables or elimination of unprofitable product lines or services.
If YOU are your business
If the company relies on you, the operations of the business may well be in your head. In which case it’s vital that you record the operational and financial aspects, so that they are clear and easily transferable to the new owner.
An additional consideration if your business is you and you’ve been taking dividends, the purchaser may take the view that a large part of the dividend income should be treated as remuneration and therefore deducted from annual profits before tax. This will reduce the company valuation, which is based on trading profits. To counter this argument, you should consider if the profit multiple on which the sale price is based can be increased on the assumption that the cost of management rewards is adequately provided for.
Preparing to sell your SME Business
If your business relies on several key employees, this could also affect the value of the company. You will need to review their long-term goals and expectations to determine how they coincide with your plans to sell the business. A recruitment strategy may be required to position your company more attractively and protect its value.
To secure the best price...
All these matters need to be addressed and not just simply referring to last year’s financials for an idea of what the sale price might be.
Your company must be able to pass the scrutiny of the buyer so that there is no reason to reduce the sale price.
For any help in these matters, you can call David Cane on 07749 080 806 or email.
