8 reasons to prepare early for a business sale

Like many things, preparation is the key to success. The same is true for business owners that want to take a full or partial exit from their companies. In tougher economic times, when it’s a buyer’s market, early planning is even more important.

We are often asked for advice on getting the timing of a sale right. Well, much depends on the time you allow for preparation; we recommend two years.

Time is the keyword here. For two reasons.

Firstly, taking time out just to reflect on the business and the role it plays in your personal life. It’s often the main reason business owners decide to sell because they need time away from the pressures of running the business.

With that in mind, it is essential to take time to think about what you want to achieve through a sale – do you want to retire fully, or would you prefer to stay in the business without the operational and financial responsibilities that you have as owner. Bear in mind your thinking on this can and often does change as the process works through, but that’s okay.

Just having an understanding of what’s involved in the various stages of a business sale, and how that will impact your business and personal life, will stand you in good stead for the ups and downs of this complex process.

Secondly, taking early preparation steps will give you much needed time to identify and address any potential issues in your business, especially if they could reduce the sale value.

Businesses that are well-prepared for sale present better to buyers and are more likely to attract multiple buyers, thereby ensuring the owners receive the maximum value.

By taking time to understand how deals and price negotiations are structured you will make more informed choices. Learning as you go is no substitute for prior preparation; there won’t be time for that during the process . Moreover, during the due diligence, when your business is exposed to the full glare of a buyer’s legal and financial teams, you will be confident and able to deal with this whilst you continue to run your business.

One of the main benefits of early preparation is taking time to understand how you want to present the financial picture of the business – both in terms of the recent trading past, where you are now and where the business has the potential to be in the future.

Many business owners find this the most challenging part of the process.

“Past performance is no guarantee of future results” – a phrase that’s used in most advertising campaigns by investment managers. In business valuations historic performance is just one of the contributing factors.

Don’t be put off by any downturn from the Pandemic and the ensuing shortage of people and equipment, with associated cost rises  – most companies have suffered from the business equivalent of “Long COVID.” What buyers will look for is how well the business has recovered, rather than how “sick” it was.

They will, however, expect a well-reasoned, achievable guide to what the owners expect the future performance of the business could potentially achieve that they can use, along with several other considerations, such as comparable businesses, industry performance and the target business’s history to enable them to form a view as to what the valuation and any associated deal structure should look like.

To summarise, well prepared businesses will:

  • Be more attractive to buyers
  • Attract higher valuations
  • Have a choice of bidders and so be able to select the best “fit” and the right price
  • Be more robust in negotiations, with less chance of price chipping
  • Be able to clearly present the required deal structure
  • Be more in control of the process
  • Be able to continue focusing on the business during the process
  • Be more likely to successfully complete a transaction

As many of our Clients will say, selling a business is a lengthy process and not an easy journey. It will almost certainly be emotionally draining and being prepared will help you manage the timetable pressures of the deal and get you through those tough moments, particularly towards the end of the process.

Our team works only with private business owners, helping them to attract the investment they need and deserve, and, depending on the shareholders plans, ensure they have choices as to what the collective futures look like for themselves, for their businesses and for the people so critical to the delivery of that success.

Here’s a good example of the benefits of early preparation from a Client that recently completed the sale of his business and achieved a significantly higher sale price “At the time, when we were starting to consider selling the business, we spoke with EvolutionCBS and they told us, No, you’re not right and they gave us some advice, looked at where we were financially, looked at where the business was growing and what we were achieving and at that point suggested to us, Yes, you’re close but I would put another year or two into what you’re doing to take the business on a step or two further before you come back and look at a sale and that was advice that we certainly took onboard and at the time”

You’ll find a list of things to consider when you first start considering a business sale on our website –  preparing-a-business-for-sale/

If you are an owner or shareholder of a business and would like a no-obligation consultation on the sale of your business, please email: info@evolutioncbs.co.uk  or contact us on Tel: 0118 959 8224.


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