Your step-by-step guide to selling a UK business is often the final step in your business venture. You will eventually want to move on or retire from your business, and finally, extract as much value as possible from it. Choosing between the two is a difficult decision, and there are many legal and tax implications to consider. Learn how to make the right choice.
Step 1 – Identify your objectives and expectations
What is your motivation for selling your business? Depending on your situation, you may be ready to retire or you may want to release capital to a step-by-step guide to selling a UK business. Possibly you have had a partnership dispute and want to move on, or profits are dwindling and you are afraid of losing more money.
No matter what your reasons may be, you should always keep your end goal in mind. There is no doubt that setting objectives to focus the process, whether it is an amount you need to collect or a deadline you want to meet, will produce results. If you want to make the deal, you should plan on it taking six to nine months. Therefore, getting ready early will be crucial.
Step 2 – Set the business up for sale
Making a business as appealing as possible to a potential buyer is an important part of a step-by-step guide to selling a UK business. Preparing a house for sale is akin to putting the finishing touches on your home. You can take these steps:
- Establish a strong team and corporate structure that would be attractive to buyers
- Make sure the premises are clean (and fix any broken equipment!).
- Resolve any disputes with suppliers, employees, and clients.
- Ensure all leases and contracts are up to date.
- Lower your personal expenses.
- Ideally, prepare up-to-date accounts to be sold just before or at the end of the year
- progressively passing ownership responsibilities to management
- Discuss possible deal structures with tax, legal, and accounting advisers
Step 3 – Find out how much tax you’ll have to pay
When your step-by-step guide to selling a UK business and making a profit, you’ll owe capital gains tax on anything over your tax-free allowance. You can reduce the cost by taking advantage of the following tax reliefs:
- Capital gains tax relief on business asset disposals is available to sole traders and business partners who owned the business for at least two years
- Capital gains tax relief for business asset rollover – defer paying capital gains tax on assets sold if the money is used to buy new assets within three years
- By transferring step-by-step guide to selling a UK business and its assets in exchange for shares, you can delay paying capital gains tax when you transfer your business to a company
- You can transfer the responsibility of paying capital gains tax to the purchaser if you sell a business asset as a gift
Additionally, you’ll need to take into account the VAT your business pays. You can usually transfer your VAT number to the new owner if you’re registered for VAT, which is something to consider when structuring the deal.
Your employer should be told the moment you stop trading if you are self-employed. An online form can be used to notify them. A self-assessment tax return will need to be completed and it will need to include the date the business ceased.
Step 4 – Select the right time to sell
Although you may already have a deadline in mind for the step-by-step guide to selling a UK business, you should carefully consider the timing that will assure the best deal and facilitate the smoothest transaction. You should generally consider selling your business when profits are high to attract buyers. If economic markets are expanding and buyers are looking for deals, you might also want to consider selling your business.
Allow yourself a lot of time to prepare for your sale. Ideally, you should start preparing your business for sale two years in advance so that you can prepare your accounts, build your team, and expand your customer base, all of which will help you achieve a higher sale price.
Step 5 – Have your business valued
Comparable to a house appraisal, a business valuation is a tool used to determine the value of goods and services. An asking price for your business is determined by factors including physical assets, projected profits, your brand’s reputation, and the industry in which you operate. While different methods exist for valuing your step-by-step guide to selling a UK business, it is helpful to have an expert give you an educated estimate and a detailed summary.
It isn’t necessarily the price it will eventually sell for, just like with a house valuation. You should be prepared for a lot of haggling and be prepared to defend your estimate with lots of evidence.
Step 6 – Design a sales brochure
The same as houses for sale come with a description of their features, businesses for sale have a document summarizing their selling points.
The one-page summary should be focused on the headline points including the type of work you do, your location, your USPs, reasons for sale, turnover, and potential for growth. Afterward, gather more detailed information regarding your operations, premises, leases, equipment, and other assets. It may be necessary to prepare an operating manual before a sale goes through in order to ease the buyer’s transition.
Step 7 – Complete due diligence
If a buyer is seriously interested in your step-by-step guide to selling a UK business, they’ll carry out due diligence rigorously to make sure they’re getting a good deal. If there are any gaps or glitches, they will simply be turned off, so it’s worth having a lawyer or accountant handle this step for you. In order to give you some idea, here are some key things to watch for:
- Pay off your liabilities or be transparent about them
- Gather financial documents and tax returns going back at least three years (or your first year in business if it’s less than three years old).
- Registers required by law – ensure Companies House and other registers are current
- Clearly identify the assets and properties included in the sale and prepare lease documents in advance if one exists
- For shareholders, prepare information about the shareholders’ position
- Make sure your trademarks, copyrights, company name and domain name are properly protected
- Review employee, supplier, and client contracts to make sure they are all up-to-date and clear
- Insurance –Make sure that you have the necessary business insurance in place before the deal is finalized
Step 8 – Find the right buyer
Today, you have more options than ever for finding a buyer for your business. If you’re interested in step-by-step guide to selling a UK business, you may want to advertise it in local or business publications or check out websites that list businesses for sale. If you’re a small business, social media may be more effective than traditional advertising. Perhaps you can approach a customer, supplier, or even a competitor who you think might be interested. You could also work through a broker.
Step 9 – Using a broker may be beneficial
You will be able to sell your properties to buyers through a broker. The broker will help you find potential buyers and negotiate the best deal. Despite paying for their services (usually between 1% and 10% of the business value), the higher price you may achieve is worth it. Advantages of going through a broker include:
- Finding buyers and negotiating deals can be a full-time job, and you might not have the time to do it well
- You will have access to a broader range of options if you’re new to selling a business and don’t know where to look for buyers
- Obtain a higher price – brokers usually work on commission, so they’ll work hard to fetch the highest price to increase their income
- explain experienced negotiator-broker can handle the negotiations for you, handling difficult conversations that may be difficult for you
Step 10 – Get ready to negotiate
Generally, your buyers will wish to negotiate with you in order to get a lower price or better terms. In order to avoid losing a deal before you’ve had a chance to negotiate, you should make regular contact with your customer when offers come in.
Negotiation is a two-way street. Keep in mind that there’s room in your valuation for the price to drop slightly, but don’t let it go below a certain amount. Don’t forget to research your prospective buyer as well. Find out what their needs are and focus on your USPs that can be particularly valuable to them. In the case that your buyer already owns a business, look for synergies between yours and theirs to help you convince them that your business is the missing piece they’ve been looking for.
Ensure that your buyer has the necessary finances in place to purchase your step-by-step guide to selling a UK business, as this will ensure a smooth sale.
Here’s one of the most crucial tips: at this point, you should be writing everything down. You should follow up phone conversations with an email that you can refer to should there be any disagreements down the road. In order to protect your business, you should also ask potential buyers to sign confidentiality/nondisclosure agreements.
Step 11 – Complete the sale of the business
Typically your solicitor will guide you through this step, helping you review agreements and come to an agreement on-sale date. The main agreements include:
- Agreements governing the purchase and sale of goods or services
- Documents from the lender – if the buyer is borrowing money to finance the purchase, these must be included and reviewed
- There will need to be an assignment of lease agreements if there is a leased premises or equipment
- Sale of assets – this document transfers the assets from the seller to the buyer
- You may be asked to sign an agreement that prevents you from starting a new step-by-step guide to selling a UK business in direct competition with the company
Step 12 – Post-sale procedures
To avoid interfering with the sale, wait until the deal is finalized before informing your employees. After the agreements are in place, inform the employees of what will happen, how the sale will affect them, and where they can find information and support.
You will need to pay any taxes due once you have sold the business. Make sure you do not spend profits too quickly, so you can pay taxes when they come due.
It’s important to keep in mind that step-by-step guide to selling a UK business isn’t the only exit strategy you can use – there are many others as well. Discuss which is most appropriate with your accountant based on your personal circumstances and goals.