Menu
Most business owners start thinking seriously about selling when someone gets in touch with an offer. It feels like the start of the process. In reality, it's usually the moment you find out how ready you are.
The work that decides what your business is worth happens long before a buyer appears. Here's where to start.
Most business owners start thinking about selling when a buyer gets in touch. By then it's often too late to get the best price.
Before you think about price, buyers or timing, ask yourself one question. Do you understand your own numbers in full?
The first thing to understand is where your business is positioned and what value it brings to a buyer. That starts with clear, complete and accurate financial records.
That means up to date accounts and reliable reports. It means knowing which parts of the business make money and which don't. It means being able to explain any of it to someone else.
When an approach comes in, it's tempting to move fast. You want to keep the buyer interested, so you rush to give them what they ask for.
That's where things often fall apart. Due diligence asks for reports and evidence that don't exist, or that take months to pull together. A conversation that started well loses its footing. Without a solid financial base, the sale has no backbone.
Being ready before anyone asks puts you in control of the conversation.
Start with the end in mind. If your retirement plan is to sell, every decision between now and then should make the business easier to sell.
That means not building everything around yourself. If you're the sales lead, the operations manager and the person who fixes everything, a buyer has to replace all of those roles. Each one carries a cost, and each cost reduces what they'll pay.
A business that runs without its owner is worth more. It's also easier to run in the meantime.
Our advice for owners with a few years to go is to start treating the business as something to improve, not just something to run.
Look at how work gets done and where time is wasted. Look at your revenue streams and how dependable they are. Keep your financial records tidy, as though a buyer will be reading them. One day, one will be.
The goal is to present records you understand completely and can explain with confidence. That reassures a buyer more than any sales pitch.
If you want to see the kind of reporting that helps, our post on business dashboards for small business shows what to track.
Every business owner sees their own business through rose tinted glasses. It's natural. You built it, you know how hard it was, and you know its strengths.
A third party sees what you can't. That might be gaps in your reporting, processes that rely too heavily on one person, or areas where profit is leaking. If you spot them five years before a sale, you have time to fix them.
Many businesses are valued as a multiple of their profit. That means every extra pound of profit can be worth several pounds when you sell.
A way to add turnover that drops straight through to profit is to multiply that by the valuation multiple, and the effect on your final price is significant. Improvements that seem modest year to year can change everything at the point of sale.
If you've decided you want to sell at some point, that decision is the moment to start preparing. It's a shift in how you think about the business, and an accountant can help you turn it into a plan.
It's never too soon to start planning your exit.
Selling your business is likely to be one of the biggest financial decisions you make. The earlier you prepare, the more choice you'll have about when you sell, who you sell to and what you walk away with.
If you're thinking about selling in the next few years, get in touch. We'll help you see your business the way a buyer will, and build a plan to make it worth more.
Get in touch: carthyaccountants.co.uk/contact
