Thinking of retiring and selling your business?

Selling your business can be a complicated process. You need to think about: 

• How you’ll find a buyer
• What kind of valuation method to use
• What your exit strategy will look like
• How you’ll structure the deal

That’s why you should work with an experienced business transfer agent. They’ll help you maximise your sale price, optimise your business’s exposure to prospective buyers and time the process to fit neatly around your retirement calendar. But where do you start? Here’s our quick guide.

PREPARING YOUR BUSINESS FOR SALE

You might want to retire as soon as possible, but selling your business quickly is rarely advisable. To make your business as attractive as possible to prospective buyers, you might have debts to settle, internal restructuring you can do, and improvements that will make your business more attractive on a surface level.

It’s also worth considering the changes you can make to increase your income and improve your business’s reputation in the short term. Although these steps take time, they will help you create a more robust and saleable business. That’s why, depending on the current health of your business, it can be advisable to start preparing it for sale up to two years before your intended retirement date.

CHOOSING THE RIGHT TIME TO SELL

Timing the sale of your business should start with your intended retirement date. That will give you a target to aim for. However, as you begin the preparations and that date nears, other factors might affect your decision. 

For example, you might sign a lucrative, long-term contract with a new client, in which case, you might achieve a higher price if you sell sooner rather than later. Similarly, if you have a lease renewal date on the horizon, selling the business before renewing the lease will allow prospective buyers to change the business’s location and could widen its appeal.

On the other hand, if conditions in the market or the wider economy take a downturn, it may make sense to delay the sale. These are all factors a business transfer agent will help you consider. 

STRUCTURING THE DEAL

There are several ways to sell your business, with each deal structure giving you a different financial outcome. The right option for you will depend on your goals, the size of the business, the industry and the market conditions. 

You could choose an outright sale, known as a share sale, where the buyer buys the business in full and you transfer the ownership. Alternatively, a gradual sale might be an option, where the sale is financed and the buyer pays for the business over time. There are also lease deals, where the ‘buyer’ makes regular payments for temporary rights over the business. 

Another option is a management buyout, where key employees acquire company assets and operations. Alternatively, if you can’t sell the business as a going concern, you could wind it up. To do that, you would appoint a liquidator to value and sell the company’s assets on your behalf. They’ll then pay you the proceeds minus their fee.

VALUING YOUR BUSINESS CORRECTLY

Once you’ve decided when and how you’ll sell your business, the next step is to get a professional valuation. Some asset-rich businesses are valued simply by subtracting their liabilities from the total value of their assets. Alternatively, you could use a multiple of business profits, known as the price/earnings ratio, or choose a market-based approach that compares it to similar businesses that have recently been sold in the area. 

An experienced business transfer agent will determine the most appropriate valuation method to ensure you receive a fair return for your hard work and enjoy a good standard of living in your retirement.

FINDING A TRUSTED EXPERT

Our business sales team, including the specialists at Ernest Wilson, has been helping people sell their businesses for over 65 years. If you’re thinking about retirement and would like professional assistance, a business valuation or advice on preparing your business for sale, please get in touch for an initial consultation.