Essential Preparation to Ensure a Successful
Sale of Your Business
3 Essential actions to take before marketing your business for sale
There are many things you can do and a lot of advice out there to maximise the value of your business – make sure it is not reliant on you, put systems and processes in place, avoid customer concentration…
But wherever you lie on this journey, the following key points should be top of your list before embarking on the sale process:
- Put your management accounts in order
- Complete a Due Diligence questionnaire and prepare a dataroom
- Assess whether your company is eligible for claiming R&D tax
credits
Produce monthly Management Accounts
reports
Buyers will need to see the latest financial performance to be able to submit an offer. Last year’s statutory accounts do not show how the business is doing now. Moreover, if the buyer is raising finance, their bank/lender will need to see up to date management accounts.
Ideally you should produce monthly management account reports within 2 weeks of your month end including:
- A year to date P&L statement
- Balance Sheet
- Aged Debtors and
- Aged Creditors
With robust bookkeeping and using one of the many accounting
software packages available, you should be able to produce these reports at the click of a button.
Through our network of Finance Controllers, we offer a service to audit your management accounts set-up and make sure you are able to
provide these reports easily.
Prepare your Due Diligence Dataroom
You have just agreed a deal and signed a Heads of Terms agreement. Now you receive a due diligence questionnaire asking for management accounts, VAT returns, tax returns, articles of association, cash-flow statements, copies of employment contracts, client and supplier contracts, shareholder agreements. The list goes on.
Are you prepared? How long will it take you to prepare this information? Are there any hidden issues that will affect the sale?
Delays in providing such information raise doubts with the buyer and provide excuses for the buyer to renegotiate or pull-out. Time goes on and the euphoria of agreeing Heads of Terms starts to drip away. Once lawyers are engaged on the transaction, time spent addressing issues arising from DD can significantly increase the cost of the transaction.
The answer? Complete a Due Diligence questionnaire and set-up a Dataroom before you start the process of marketing your business for sale.
A day spent with one of our Business Sale Consultants will be invaluable in i) Identifying any accounting or legal issues that my derail the sale process, ii) Keeping the momentum on the deal, and iii) Keeping transaction costs low.
Assess whether your company can
claim R&D tax credits
If your company has spent time and resources on developing new
products or services, it may be able to claim significant tax relief by means of a payment back from HMRC or a reduced Corporation Tax bill.
An R&D tax credit for a single project can represent a significant
windfall. Annual R&D tax credits for ongoing research and development work will add significantly to your profitability and therefore the value of your business.
If you don’t claim your R&D tax credits, whoever buys your company almost certainly will do so instead and you will lose out on the windfall and/or enhanced valuation.
Note however that the rules around R&D claims have tightened over recent years, so it is worth seeking sound advice on the validity of your R&D tax credit claim.
Request a free business appraisal today
We are specialist business brokers, focused on selling owner managed SME businesses with revenues of £750k to £15m. We sell over 80% of our business sale assignments within 12 months and the key to our success is preparation.
There are many factors to think about when considering whether to sell your business.
- What is the value of your business?
- Is your business sellable?
- How should you prepare your business to achieve maximum value?
We offer a FREE appraisal to help you answer these questions and any other questions you may have. Our appraisal can take the form of a face-to-face meeting, video conference or telephone call, as you prefer.
Arrange an appointment now, complete the enquiry form.
