Selling your business
Selling your business can be highly profitable. It can also be stressful, time consuming and at times worrying. We're here to help you maximise the benefits. We work with your accountant and solicitor to find the best way to take your money and ensure that it provides for what comes next.
Who are you selling to?
Understand the buyers motivation. Do they want your product to sell to their customers? Do they want to sell their products to your customers? Are they a consolidator who want to change your business so that it looks like theirs and reduce costs? The reason for the purchase will tell you what to expect.
The person buying your business is not emotionally involved in the same way that you are. It’s an investment for them. That doesn’t stop it being important but in all likelihood they won’t feel the way you do. Their priorities will differ from yours. That will mean that they will make decisions which aren’t what you would choose. You’ll have to roll with them if the contract doesn’t stipulate what should be happening.
Types of business sale
There are two main ways of selling your business; a share sale and an asset sale. With a share sale the buyer purchases your shares and takes ownership of the company as a going concern. With an asset sale they tend to buy part of your business but not all of it. So they might buy your clients, goodwill, stock and technology but not the liabilities.
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A share sale will generally provide tax benefits for the seller whereas the sale price will be treated as a receipt (with tax payable) for an asset purchase.
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The type of sale should be negotiable in the same way that the price, terms and timescales are.
Who are you selling to?
Understand the buyers motivation. Do they want your product to sell to their customers? Do they want to sell their products to your customers? Are they a consolidator who want to change your business so that it looks like theirs and reduce costs? The reason for the purchase will tell you what to expect.
The person buying your business is not emotionally involved in the same way that you are. It’s an investment for them. That doesn’t stop it being important but in all likelihood they won’t feel the way you do. Their priorities may differ from yours. That will mean that they may make decisions which aren’t what you would choose. You’ll have to roll with them if the contract doesn’t stipulate what should be happening.
They seem nice
The contract can never be too precise. If there is even a hint of vagueness in relation to a clause in the contract there is a chance you’ll disagree over what it means further down the line. Ask yourself how something could be measured and ensure that you have a contract which says how much, over what time, measured in which way. For everything. Maintain control for as long as you can, wherever you can. Don’t let them have control of pricing during the earn out. Ensure that you are rewarded for profit improvements instead. In that way your priorities are aligned. You don’t want them being able to whack up prices where you pay for the fall in profits via a reduced earn out payment. If they include a cap on pricing increases then assume they will increase prices by that amount and not a penny less. It’s tempting to assume that your lawyer will cover everything off for you in the contract but nobody knows your business like you. They cannot know everything in the way that you do. Read the contract slowly. Ask yourself ‘how could they use this against me?’ and assume they will. If something looks like it could cause a problem have your lawyer make it go away. As cynical as this sounds, be assured its better to have things ironed out before the contract is signed.