How To Sell A Business Properly

Get expert advice from the team that sell more businesses than any other UK-based adviser.

When making the decision to sell your company, it’s natural to be slightly apprehensive about what the process entails. In this guide, we’ll show you how to sell a business effectively and what steps to follow. 

This guide applies to companies in every sector, from engineering and construction to e-commerce and IT.

Table of Contents

1. Preparing for a sale
2. Valuing your business
3. Due diligence
4. Finding the right buyer
5. Completing the purchase
6. After the sale
7. FAQs

Preparing your business for a sale

There are lots of different reasons why you would want to sell your business. What’s important is that you keep your end goal in mind at every stage of the sale. This could be something as straightforward as:

• Knowing what value you would like to achieve for your business
• The structure of the transaction and whether you want to retain a vested interest

Having a stated objective will help us to create a bespoke strategy that is targeted towards accomplishing the exact type of exit you are looking for.

We would also encourage the following actions, which will help to smoothen the process:

• Ensure financial accounts highlighting the business’s performance are up to date
• Be aware of how the company’s growth trajectory can be projected (our team can assist here)
• Compile a detailed asset inventory
• Renew, if necessary, any key contracts and have all documentation readily available
• Settle any disputes with suppliers, employees or clients
• Make sure the optics of your company are as appealing to buyers as possible

Is your business attractive to buyers?

Next, we will help you to understand the value drivers of your business which form an important part of the marketing process we conduct to attract the highest quality acquirers.

Among the aspects on which we typically focus are:

• Growth projections
• Guaranteed future income
• Experience of staff
• Potential buyer synergies
• Sector analysis
• IP, patents and trademarks

How to sell your business at the right time

Once you’ve decided it’s time to sell, prepare as early as you can.

Market conditions can be an important factor in the timing of your sale. When the market in your sector is strong, there will be an appetite among buyers to acquire similar businesses. Or you may be anticipating a market downturn and want to sell while your business’s value remains high. 

Naturally there will be other reasons, perhaps personal to you, that signify the right moment has arrived. The circumstances will also be different if you are looking to sell your business quickly, perhaps due to a dispute with a business partner, or only looking to sell your shares in a business. Whatever the scenario, we can help you to reach an outcome which satisfies your objectives.

Valuing your business

There are several factors that will influence the value of your business. However, it is also important to remember that your business is only worth what a prospective buyer is prepared to pay for it.

Keep in mind that your business is worth more than just its assets. Other factors that will make it more valuable include:

• The quality of your staff
• The revenue your business generates
• Any liabilities it may have
• Your business’s reputation
• The property the business has
• Any ongoing contractual agreements the business may have
• Whether the industry it’s in is growing

Whereas factors that might diminish its value may include:

• If you are being forced to sell your business
• Complex and intangible assets
• If these assets are particularly vulnerable to external influences 

To maximise the value of your business, we recommend hiring a business broker (we prefer to refer to brokers as company sales advisers) to help.

True, you can have a go at selling your business without expert help. But missing out on the knowledge and resources you could have on your side would severely hinder your chances of maximising your company’s value. Hiring a company sales adviser allows you to focus on keeping your business running while benefiting from their much greater experience.

Choosing the right method to value your business

There are various ways in which a valuation will be calculated by a prospective buyer when they decide your company is a desirable acquisition.

One of the most common is the multiple of EBITDA method where the company’s yearly profit, adjusted after tax, is multiplied by an industry-standard figure, usually around five.

However, in many cases, the valuations we achieve for our clients are higher than the average multiple.

Recent sales of comparable businesses can also provide a useful indication. Here are some other valuation techniques that any research you conduct may bring up:

• Times-revenue method 
• Discounted cash flow valuation
• Entry Cost valuation
• Assets valuation method

Why is due diligence necessary in a business sale?

Interested buyers will want to review your business thoroughly before the acquisition is rubber-stamped, to gain a full appreciation of the company’s general health from legal, financial and commercial perspectives.

What you’re about to read is a brief overview. We go into this process in much more detail in our article titled: ‘How do I prepare for due diligence when selling a business?’. 

They will want to see documentation relating to:

• Budgets
• Client and supplier contracts
• Customer complaints
• Employee information
• Financial records 
• Forecasts
• Legal claims
• Liabilities 
• Monthly management accounts
• Registered assets
• Shareholder agreements
• Statutory accounts
• Tax returns

How do I sell my business to the right buyer?  

Any business owner can try to sell their company without the help of a professional adviser, although this would severely restrict their potential to maximise value due to the limited range of potential buyers they could identify.

Among the options that could be attempted are:

• Selling to a similar type of business, perhaps a competitor
• Listing the company on a sales website or in a relevant business publication
• Or if it was a very small business, on social media (such as LinkedIn)

However, whether or not you are expecting your company to be worth a life-changing valuation, we strongly recommend seeking expert help when you are mulling over the decision to sell. Especially as the process can be a time-consuming commitment when you are striving to keep the company operating to best effect. It makes sense to team up with a company sales adviser which can demonstrate an impressive track record of completed sales and TrustPilot reviews, like we have listed here. This gives you an idea of who they are and how reputable they are.

How to protect your business while looking for a buyer

When negotiating with buyers, get them to sign a non-disclosure agreement. It is not unknown for competitors to masquerade as buyers when all they’re really doing is examining how your business works. An NDA will ensure confidentiality and will protect any trade secrets, intellectual property and other sensitive information you may have. 

At KBS Corporate, every party that expresses interest in acquiring a business through us must sign a NDA and our team members are individually trained to maintain client confidentiality at all times.

We also recommend the following:

• Do your own due diligence on any potential buyers before committing to anything, including if they pre-qualify for financing, along with collecting references into their reputation.
  
  At KBS Corporate, due diligence is conducted with the highest levels of privacy, utilising virtual data rooms with state-of-the-art cybersecurity in which we maintain full control of access.
  
• Staying in contact with two or three potential buyers in case the negotiations fall through.

Matters to settle after completing a business purchase agreement

Once you’ve agreed conditions of a sale, the important next step is that there are no ambiguities. We will be right beside you to establish the answers to questions such as:

• When will ownership be transferred?
• How much is the sale value?
• What is the structure of the deal?
• What will happen if the buyer withdraws?
• When is the best time to inform staff?

All of these questions are very important and need to be settled. The last one particularly so, as it involves the daily lives of real, hard-working people. 

Keep in mind also that, because a lawyer is a fundamental requirement of a company sale, we can pair you up with one of our trusted legal partners whose fees are not only transparent but also dependent on a successful conclusion to the sale.

A company sales adviser will take care of these legal matters. And even if you are selling without an adviser, you will need a solicitor to help you.

What to do after you’ve sold your business

Most people make a profit from selling their business. If you make a profit, you will need to pay Capital Gains Tax. But there are tax reliefs you can take advantage of, such as Business Asset Disposal Relief, which our sister company, K3 Tax Advisory, can explain to you.

Additionally, we can explore ways to structure the deal to ensure you as the seller extract the highest possible value.

We talk about the issue of tax in more detail in our guide ‘How much tax will I pay when selling a business?’ After the ownership of shares has been transferred, staff will need to be informed of the upcoming changes and notification submitted to Companies House.

You will also need to think about the VAT your former business paid. If you’re VAT registered, you might be able to simply transfer your details over to the new business owner. The UK Government’s page on registering for VAT is a useful guide on this. 

And if you’re self-employed, you should notify HMRC as soon as possible with the date you stopped trading. You will also need to complete a self-assessment tax return. Sole traders, sellers in a partnership, and directors of limited companies also have slightly different aftersale responsibilities.

FAQs — How to sell a business