Things To Consider When Selling Your Business
If you have decided to sell your business, it is vital that you take your time and ensure that you are getting maximum value from the sale – always remember that you can only sell it once, so you want to make sure that you have no regrets afterwards. There are so many things to take into consideration, including intellectual property rights, the deal structure, and how the sale process will work. How do you plan to attract prospective buyers?
Would you want there to be a non-disclosure agreement? When should you advise clients or any potential sale? Below are five of the many things you should consider when the time comes to sell your business.
Consider Your Long-Term Financial Goals
Depending on your reasons for selling, you must have a clear understanding of the financial implications of selling the business. Although it is very tempting to think about the money you will receive from the sale, do not overlook the fact that whatever money you currently take out of the business every month as dividends or as a salary will no longer be available to you. Always consider the long and short-term benefits of any deal.
Invest In Corporate Financial Advice
As mentioned above, you can only sell your business once, so it is critical that you get every aspect of the deal correct. As the owner and possibly founder of the company, you may have an unrealistic view of the value of your business; many people undervalue it! Don’t be tempted to take the first offer that comes along; Seeking advice and utilising the skills of a company that understands the market could be a very shrewd investment.
Investigate and Understand Inheritance Tax
The financial tax laws are always subject to change, but as things stand, existing company shares should be protected from inheritance tax at the time of writing. Business Property Relief (BPR) provides relief from Inheritance Tax (IHT) on transferring relevant business assets at a rate of 50% or 100%, but it is important to seek proper financial advice and understand the tax consequences before committing to the sale of any business. Prepare properly by using IHT planning or some form of insurance protection.
Consider Rewarding Any Long-Term Employees
A successful business relies on its employees to drive the company forward. If and when the time comes to sell your business, think long and hard about rewarding some of your long-term employees, who played a crucial role in helping you to achieve success. One of the best methods of doing this is to use tax-efficient share schemes (maybe predicated on the deal completing). Once again, a company such as AW Capital can provide advice and guidance on setting this up correctly so that your wishes are fulfilled.
Do you qualify for Entrepreneurs Relief? If so, it is essential to understand how the qualification conditions apply to your individual situation, as unfortunately, many owners and certain businesses fail to qualify for this benefit. Be aware of issues such as shareholder-employees ceasing to be an employee on the date of the deal if they retire early. It might even be possible to structure any deal so that you meet the 12 month ER qualifying period.
Selling your business can be a very personal and, for some owners, painful process. Many owners are emotionally tied to the company, which can cloud their judgment and force them to make poor decisions. That is why it is critical to use a professional advisor, who has no emotional link to your business, to evaluate and assist with the selling process. If you are contemplating putting your business up for sale within the next year, our advice would be to contact us today on 0333 7726165 to discuss all of the available options.
This will ensure that we have time to plan the process and devise a roadmap, ultimately benefiting you and ensuring a smooth transition.