5 practical things to do now to make selling your business in 5 years simpler

Whether it be to pursue a new venture, retire, or simply enjoy the fruits of your labours, as a business owner you may intend to one day sell your company to a third-party buyer. At Clarion Wealth, we work with many people for whom this is an aim.

If you’re planning to sell your business in the next five years or so, the sale day may seem like it’s a long way off. However, there are plenty of things you can do now in the run-up to the sale to ensure you get the best outcome, and to make the process as smooth as possible.

Read on to discover five things you can do now to make selling your business in five years simpler.

1. Ensure your accounts are in order

When you come to meeting potential buyers of your business, they will want to see accounts from at least the past three to five years, and perhaps even longer. Buyers will want to understand your income, expenses, and profitability to assess whether they want to purchase your business, and to calculate a purchase price.

In preparation for this, it can be very important to make sure your accounts are in good shape. This could include separating personal expenses from business expenses, reviewing insurance claims histories, and making sure all information is accurate and up to date.

Additionally, it may be beneficial to create financial projections for the next three to five years –buyers could want to see this too.

Performing these tasks now will make your life easier later down the line when you will also have many other sale-related tasks on your plate.

2. Get your business valued

Getting your business valued can be a very important step in selling. You may think that this is something that you don’t need to do until closer to the sale, but there are several benefits to getting a valuation done when the sale is still years away.

By placing a value on your business now, you can begin to plan for the sale and for your life after you exit.

For example, if you have certain aims after the sale – travelling, setting up a new business or moving to a new area – you will likely need the sale of your business to generate a certain level of capital. If the current value of your business doesn’t meet these cash requirements, then you can work to increase the value of your business, or potentially delay the planned sale.

A financial planner can help you to establish what your “number” is using cashflow planning – this means you can make informed decisions when considering offers for the business.

Knowing the value of your business will also help you further down the line when it comes to negotiating with potential buyers.

3. Make sure you are emotionally ready to let go of your business

There are many practical and financial steps on the path to selling your business, but one aspect that is often overlooked is the emotional change that happens when you let go.

Prior to committing to a path from which you cannot return, check in with yourself:

Are you emotionally ready?
What is going to be your new purpose after the sale?

Many people find their personality is partly defined by who they are as an entrepreneur, so it’s worth taking the time to work out your personal goals in the sale, not just the financial.

You may find that you actually want to delay the sale of your company or pursue a different exit route. By emotionally preparing now, you can make the time around the sale simpler for all involved.

4. Polish your business systems and processes

To make sure your business is as attractive as possible to potential buyers, it’s important to make sure your business systems and processes are all running as efficiently as they can be.

A well-oiled machine will be much more attractive to buyers than a business that will require structural changes and system reworks.

5. Establish your priorities in the sale

Deciding on what your priorities in selling your business are will inform many aspects of the selling process, so establishing them early can be very helpful.

Potential priorities for your sale could include:

Maximising sale price
Structure of payout (i.e. single cash payout, seller financing)
Protecting your business’ legacy
Protecting your employees
Protecting your clients
Staying on as an employee post-sale
Speed of sale process.

By identifying what is important to you, you can develop an exit strategy that makes achieving your goals simpler. For example, if protecting your business’ legacy is important to you, you may consider selling to an Employee Ownership Trust.

Get in touch

If you’re planning to sell your business in the next five years or so, it can be beneficial to speak to a professional to make the process as simple as possible.

At Clarion Wealth, we have worked alongside many business owners as they plan and execute their exits. To find out how we could help you, email [email protected] or call us on 01625 466360.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning or will writing.