What you should consider when selling your business

The first and, perhaps, most difficult step is to view your business realistically as if you’re a possible buyer. You will need to ask yourself some challenging questions about customers, profits and competitiveness. 

 

Before looking for a buyer you can take steps to make sure everything is in good order. You can organise your records, contracts and documents to present your business in the best light. Of course, you’ll need up to date accounts and a clear picture of your business debt too. Then there are some important steps to follow. 

 

Valuation. All the time and effort you’ve devoted to your business won’t set the sale price. Instead, you must consider what your business is worth to other people. This involves more than your business assets and could include your ongoing revenue, liabilities, and reputation. You could use a price-to-earnings approach to convince buyers your business is a good proposition. This will help them estimate how long it will take to get their investment back. There are professionals who can help with the valuation process. Whatever price you set, you should be prepared to negotiate with possible buyers. 

 

Legal constraints. Other considerations include employee contracts, transfer of leases and business debts. Contractual agreements with customers, investors and suppliers may need renegotiation. 

 

Business structure. Limited company directors may want to consider the benefits of an asset sale or a share sale. This can have important implications for tax and buyers may also have a view about their preferred approach. Professional advice will help you decide which is the best option for your business. 

 

Business brokers can help you find the right buyer and will know when and how to promote the sale. Before engaging anyone, you should carefully check their previous performance, seek references and check their terms and conditions. Depending on your business, you might need to protect your intellectual property. Asking interested buyers to sign a non-disclosure agreement should not cause a problem if they’re genuine. You should also consider when to let your employees know about the planned sale. Taking up references and checking the financial position of potential buyers is also important. 

 

It’s essential you understand all the details of your sale agreement. These will include things like the price, assets, transfer of ownership and key stages to completion. If you’re selling your share in a partnership, you’ll need to understand any restrictions. To avoid problems, good professional advice is important. 

 

Your decision to sell will affect your employees, suppliers and customers. TUPE (Transfer of Undertakings (Protection of Employment) Regulations) may apply. You’re required to give certain information to your employees and the new owner. You may have to carry out consultation as part of the process. Most importantly, you’ll want to make sure everyone feels you have treated them fairly. 

 

If you’re self-employed and plan to stop work, you’ll need to let HMRC know to cancel your Class 2 National Insurance Contributions (NICs). 

 

You must complete a self-assessment tax (SAT) return for the year, confirm the date you stopped trading, and pay any tax you owe. 

 

If you’re selling your shareholding in a limited company, you must appoint new directors before you resign and notify Companies House. 

 

If you make a profit when you sell your business, Capital Gains Tax (CGT) will apply. You may receive tax reliefs through the Business Asset Disposal Relief scheme, for example. This can reduce your CGT liability to 14% if you have owned the business for at least two years. 

 

If you’re VAT registered, you may be able to transfer your registration number to the new owner.