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When is the Best Time to Sell a Business?

The Summer of 2020 has given more cause than previous years to reflect and review. Most business owners have been hit with the adverse effects of Covid-19 and many yet are bracing themselves for the impact of a potential hard-Brexit. Upcoming potential changes in capital gains tax bring exit-planning into sharp focus.

For some business owners, this perfect storm has sharpened their focus on retirement or semi-retirement. For those with no obvious succession plan, contemplation has been given to a company sale. This has sparked discussions with us over the holidays about when is the best time to sell?

Best Time to Sell

For every business owner the timescale is totally unique but for every single one there is one imperative that is consistent. If you are considering a company sale then the sooner you make a plan the better. This will ensure that the business is match-ready when the time is right.

Begin with the end in mind

Usually a business owner will have a ‘figure’ in mind that they want to achieve. An M&A professional will be able to discuss with you how realistic this is and steps you can take to optimise the value.

But there are more considerations to appraise. Will you be open to working in the business during a handover and if so, for how long? Are there family members or key staff that will be staying with the business whose roles need securing? Once started, the process can seem relentless, especially on top of a full-time role, so take time ahead to properly define parameters objectively.

Get Exit Ready

Once you have decided that selling is an option, it’s time to look at whether the business is ready. Exit-planning ensures business owners initiate the strategies that will ensure a more favourable result. The exit-ready business gives the owner(s) a broader range of choices. Being exit-ready significantly increases the likelihood of securing the right buyer at the right price.

Anticipate risks

Buyers will have their own substantial check list of requirements. They will want to identify any risks as part of the due-diligence process. Every un-managed risk is a potential risk to the sale or achieving the full value, so it is better to pre-empt these ahead of time and once identified mitigate them. Risks might include but are not limited to:

  • Historical inaccuracies in share transactions
  • Accounting inconsistencies
  • Lack of reliable management information
  • Weak internal systems and controls
  • Legal / compliance issues
  • HR issues…

Even the best run companies can fall down under scrutiny. With an industry-average of up to 80% of deals not going ahead (!), it is vital to a smooth sale that any issues are identified and rectified before outreach.

Planning a roadmap for success

A well-planned business exit will maximise your chances of a successful sale. Working with an experienced M&A firm will enable you to put the business in good hands, potentially attract a higher sale-price and work to minimise tax on the proceeds. Designing a specific roadmap of when and how you will exit your business will reap better results.

If your summer review included exploring a business sale, why not register for our Exit Masterclass© Here you can confidentially discuss the potential value of your business and understand how to design your roadmap and get exit ready. Click here for more details or here to register.