At some point, you may want to sell your business - or you may be involved as a professional or advisor to someone selling a business.

This article is a short summary of one key aspect of selling your business:

Preparation

This article is an extract of Steven Mather’s Guide to Selling a Business in the UK, a free ebook available from www.stevenmather.co.uk

When selling a business, information is king.

Imagine you were buying a business. You’d want to know as much about it as you could, so that you could hit the ground running, knowing the good the bad and the ugly.

One of the key steps in the legal process of buying and selling a business is due diligence (DD) and we’ll cover that in more detail in Section 9. In short, due diligence is the process through which the buyer (and their advisors) starts to understand everything about the legal, financial, operational and any other aspects of your business. Your role as seller is to take an active role in helping the buyer, providing documents and clarifying any issues.

So it makes sense to get things ready prior to selling.

Carry out a diagnostic review. Download our free DD questionnaire as a starting point. It is useful to go through the checklist making sure you have all of the documents ready to go. Most law firms will set up a virtual Data Room (or Shared Drive) which allows the Seller to upload all the documents for the Buyer to inspect.

What you need to look at now are:

- Accounts and financial information

- Borrowings and indebtedness

- Assets (a list is always helpful)

- Insurances

- Any licences and consents

- Employees and workers details

- Contracts with customers and suppliers

- Premises & Leases

Some businesses might already have documented systems in place; operating manuals and the like. These are also useful to provide to buyers. So if you do not have something, think about documenting the basics of the business now and how it works. Making yourself dispensable is actually a sound idea, because an incoming buyer will look and think this business runs itself without the input of the seller and that is usually more attractive.

When collating documents, go back 3-years. If there is a major issue, such as an insurance claim or litigation, that impacted the business, then cover that off too. A buyer is really looking to know as much as possible at the early stage, and the more transparency and information you can give, the more the business looks professional and well managed, and ultimately that reflects in the purchase price.

Planning ahead allows you to tidy up those aspects of the business that need tidying up. Filling in the cracks, as it were. Your task is absolutely not to hide any issues, just to make the business as presentable as possible. If you were selling your house, you’d probably hoover and tidy up before having a viewing, and the business is no different.

Make sure that:

- Any equipment is useable and maintained

- That key contracts are in place, documented and signed and not just verbal

- The book debts are as clean as possible

- There is no litigation or disputes

- Your employees all have contracts and you have a staff handbook in place

- You’ve complied with all legislation (data protection is a particular hotbed at present).

A variety of sources suggests that the average time for a business to be “on the market” is 6-8 months. Our experience is that using a good broker and having a good business will be less, but nonetheless it gives ample time to put things in place even if they’ve not been in place before.

It also gives you a chance to scrutinize your finances too. Look at the expenses and see whether anything can be stripped out, to make the figures look even better.

It might also be worth taking steps you hadn’t before considered, particularly with respect to intellectual property such as trade marks. If your business has a good name, logo or slogan, it might be worth registering them so that there is a tangible asset being purchased. It doesn’t cost much, but again makes the business look much more professional.

If you need any help with this questionnaire, you’re looking to sell a business or perhaps you’re buying one - get in touch today.

Steven Mather Solicitor

www.stevenmather.co.uk

Steven@stevenmather.co.uk

0116 3667 900