Whilst we hear a lot about starting a business, it is not every day that we hear about leaving one.
There are many reasons why people consider exiting a business. No matter the reason, it is always good to ensure that you meet your business goals and get a fair return on the sale.
Selling your business on the open market is the most popular option for small businesses. These sales involve two major categories of buyers:
– Individual buyers who want to become small business owners
– Larger firms interested in acquiring your business as part of this existing company (often called strategic buyers).
Either buyer can be a great opportunity for the seller but managing this process can be extremely overwhelming. Therefore, it’s highly recommended that you have a professional team on your side which should include a business broker, experienced solicitor, and accountant.
In the first case, an individual buyer is looking to buy a business to replace an income or become an entrepreneur. Typically, this will be someone with related but not direct experience in running the type of business you currently operate. This is a good thing as they will then pay for your expertise and good will. And another benefit is the individual will most often continue operating the business you started and are likely to retain key employees.
In the second case, selling your business to companies interested in acquiring your business will mean that they intend to make it part of their own company or part of their expansion plans. This is an ideal selling option for high-growth businesses that turnover £1 million a year. Large companies can spend more money than an individual and they may gain some economies of scale, thereby increasing the valuation of your business.
After the sale, your business may not look quite the same, as it can be transformed into a subsidiary or division of the buying company. Acquiring companies may also want you to stay on and to manage your business – commonly known as ‘earn out’ where the business must meet growth milestones. These deals can get very complicated, and it is very important for you to be represented.
Business Partnership share their checklist to guide those looking to sell on the open market:
- Decide what you want from the sale
- Identify and manage any deal breakers
- Put your finances in order
- Get a valuation
- Enhance the value of your business
- Decide how to market your business
- Prepare the business for handover.
No matter your exit strategy, it is critical to conduct the sale with the help of a trusted business broker or advisor. Simply putting out the proverbial ‘for sale’ sign can greatly affect your business’s value, driving away employees, customers, and vendors. Business brokers and advisors keep your sale confidential, offer the utmost expertise in valuing your business and ensure you get the best price possible.
