Preparing your business for sale – what should you be doing three years in advance to get the highest value for your business?
The decision to sell your business, whether it’s to exit, retire or start something new, is never an easy decision to take. But we all know one thing – we’d like to get the highest possible value for the business. This takes careful planning in advance.
What can you do in advance?
When preparing your business for sale, start with looking at key areas such as:
- Group review
- Trading brands and financial performance
- Disposal strategies and potential buyers
- Developing your management team – people can be one of your biggest assets
Next, think about how to better market your business to drive value in preparation for a sale. The first thing anyone will do when you come to seek a buyer is Google your business – what will they find?
Build the business profile and brand awareness through positive news stories and other PR and events. This will help you to attract the right buyers. Think about your website, online presence and routes to market.
What about your corporate reputation and external perceptions of service and quality? Do some market research and internal research to understand your product and your customers. Make sure the business you are selling has appeal and sustainable value to any potential buyers.
There are also a number of more specific things you should do as a ‘tax checklist’ to make you sure you take away the highest amount possible from the sale.
The 3 year pre-sale tax checklist
- Be clear on what it is you want to sell and take out any assets the buyer wouldn’t value. Any reorganisation or separation of assets such as property, private assets or other activities should be done well in advance of a sale to minimise tax cost.
- Check Capital Gains Tax status for Entrepreneurs’ Relief and take any appropriate steps to ensure the availability of the relief.
- Think about the likely buyers. Will it be third party trade buyers or could it be a management buyout? Think about any tax issues that may need to be addressed in advanced e.g. funding structures.
- Drive up the company value through employee participation in share schemes such as EMI.
- Maximise the value of the company through ensuring all available tax reliefs have been fully claimed, e.g. Capital Allowances or Research and Development tax reliefs.
- Pre-sale due diligence should help you to see if any issues would arise during the sales process. Any issues should then be resolved, for example bringing any HMRC enquiries to a close.
- Finally, give some thought to post sale plans. What will you do with the money?
The sales process can be long, but the better the preparation, the more attractive your business and the best chance for you to get the outcome you’re looking for – and more importantly, the best value for your business.
If you have any queries, please contact our Corporate Finance team.