Selling a business can be a daunting task, requiring a substantial investment of time and effort. Owners will have to carefully consider a variety of factors before making the decision to sell, ensuring they choose the optimal time. With this in mind, how do you sell a business?
Can I sell the business?
Before even considering a sale, owners should ascertain whether it’s even possible for them to sell their business. Limited companies registered with Company House are classified as legal entities and therefore can be sold like any other type of property.
If you are the sole director of a company, you have full ownership of the business and the decision to sell is yours alone. However, if your company has shareholders, then you need to get permission from them before selling up. That being said, there is another option for a director of a company with shareholders. Instead of selling the company, you could instead sell your shares and resign as director.
Those who own smaller business may be tempted to simply stop trading but that doesn’t negate any obligations you have to the company as it will continue to exist unless it’s officially dissolved.
Why are you selling?
Choosing to sell your business is rarely an easy decision and there are many different reasons why someone would choose this course of action. It could be due to the company itself not being successful or profitable, leading to inevitable financial difficulties. However, it could also be a personal issue- maybe the owner has had a major life change or they’re retiring. It’s worth pointing out that it could just be a case of moving on to bigger and better things.
The reason for selling your company will play a major role in the sale itself. For example, if you want to move on from your business because it’s not profitable then selling will be a lot more difficult.
Preparation
When selling a business, timing is key. Ideally, you should start preparing for the sale as early as possible, giving yourself at least a year or two before starting the process. This time allows you to make all of the necessary arrangements to ensure your business is at its most valuable.
Preparation will include ensuring you have healthy, long-term contracts, a solid record of profitability and a good relationship with your customers. It’s also worth using this time to conduct general housekeeping of the business- ensuring all your records are up to date etc.
Of course, some companies can’t show they’re currently profitable and that’s probably a major reason why they’re being sold. This should be factored into the valuation of the business but it will most probably make the overall process much more difficult.
Valuation
As is the case when selling any legal property, an accurate evaluation is paramount. Business owners can estimate a sale price themselves but employing the expertise of a third party will not only better inform your price but will also validate the sale itself. Both overpricing and under-pricing the company can lead to problems and this is why a professional valuation is incredibly useful.
Notifications
Once a sale is agreed, the owner should notify the relevant organisations, including Company House and HMRC. Company House will need information on the new director and the date of the handover. If you the company is VAT registered then this VAT number should be passed over to the new owner.
Help
As we have found out, selling a business is difficult, time-consuming and full of potential pitfalls. Therefore, it’s no surprise that many owners choose to employ the help of an accountant. Accountants have a wealth of experience in this area and have the expertise to help you through each step of the sale. Whether it’s knowing where to begin, valuation or an exit strategy, a well-trained accountant can make the process easier, safer and offer much-needed peace of mind.
