When it comes to selling your business, you’ll undoubtedly want to do it right – after all, you’ve probably worked very hard to get it to where it is today.
Many owners may find that letting go of their business is an emotional process. That’s why it’s important to plan ahead so you can make choices with your head, not just your heart.
From finding a buyer to getting your business ready for sale, there are lots of considerations for you to make before you hand it over to the new owner.
Here are five things to consider when selling your business.
1. Think about your reasons for selling
The first thing you should do is think about your reasons for wanting to sell your business.
Are you satisfied that you already have enough income for the future? Or are you concerned the business isn’t performing as well as you had hoped, and it now feels like the right time to hand it over to someone else?
Your reason for selling is important as it will matter to potential buyers, so make sure it’s clear in your mind.
In these early stages, also consider what you’re looking for in a buyer. Some business owners want to find a buyer who shares their values and will uphold them moving forwards, whereas others just want to find someone willing to buy.
Figuring out what’s important to you in a buyer will help you be more selective in deciding who to negotiate with later down the line.
2. Get the business “sale ready” and prepare in advance
As there are so many things to think about when selling your business, it’s advisable to start planning as soon as possible. Give yourself at least a year to get the business fully sale ready. This will give you enough time to thoroughly inspect the business and make any preparations before finding a buyer.
It may also help you time your sale better; by readying everything in advance, you’ll be better placed to time the market and make a sale at a point where the market is in your favour.
Another important part of your sale groundwork is getting a valuation from an independent adviser. Having a price set by an outside consultant will strengthen your position when negotiating with potential buyers.
Make sure you have all your paperwork and figures in order, too. A potential buyer will want to know everything about the business before they’re willing to put any money down.
Be completely transparent here – no good can come from trying to conceal information. Honesty is the best policy to build a strong relationship of trust between you and your buyer.
3. Think about your future position in the business
Just because you’re selling your business, it doesn’t mean you can’t be involved in some capacity. Some buyers may even prefer some of the key people in the business to stay on to ensure operational continuity.
Decide whether staying in the business is something you want to do, would consider doing if asked, or is entirely off the table for you. Be clear about your intentions for your future position with buyers.
If you’d rather no longer be involved but want to have some control over the future direction of the business in the short term, you could select your next level of management before you make your sale. Picking someone to oversee business operations could allow you to continue your business legacy through an appointed individual that you trust.
4. Check your eligibility for Business Asset Disposal Relief to reduce a potential tax bill
When you sell all or part of a business, you may have to pay Capital Gains Tax (CGT) on any profit you’ve made. This can include anything involved with the business, such as land and buildings, or machinery and even shares.
However, you may be able to make use of Business Asset Disposal Relief (BADR) to reduce a potential tax bill.
BADR replaced Entrepreneur’s Relief in April 2020 and can be used to reduce the amount of CGT you owe. To qualify, you need to have owned your business for at least two years.
BADR can reduce the CGT you pay on qualifying assets down to 10%. This can be applied to the value of your business and its assets up to a lifetime threshold of £1 million.
You may still owe tax on gains that don’t qualify for BADR, or that are above the £1 million threshold. This will be charged at your marginal rate of Income Tax.
Business tax can be complicated and difficult to understand. It’s always advisable to speak to a professional adviser if you need help.
5. Speak to a financial adviser
One of the best things you can do when selling your business is seek professional advice from a financial planner.
At Cordiner Wealth, we’ll be able to guide you through the whole process of selling your business. From getting it ready for sale, to navigating the complexities of tax and tax relief, we’ll be there to help you the whole way.
Get in touch
If you’d like to know how we can advise you when selling your business, please get in touch.
Email firstname.lastname@example.org or call 0113 262 1242.