Unless you happen to be the one person who answers a knock on the door to find someone so desperate to buy your business that they’ll pay whatever you want for it – and I’ve never dealt with one in my career – you will find that when you do want to sell your business, it isn’t easy. If you are to maximise the price you get, the business or company has to be “clean” (minimising the risk of the buyer price-chipping); you and your fellow shareholders need to know what you will accept and the taxation implications of that; and then you have to find a buyer. All in all, it isn’t easy: much more art, rather than science.
Among the market trends just now are:
– There are very few deals where the whole of the agreed price is paid on the date of sale. Many deals involve some element of deferred consideration or earn out – and they cause potential tax problems (when are you treated as receiving the cash, for tax purposes) and risk issues (will I get the deferred element?). It’s best to be briefed about these sort of things before going into any negotiations.
– Capital Gains Tax relief. I know that I have already mentioned tax a couple of times, but Entrepreneur’s Relief (ER) from CGT is such a useful relief that many deals are shaped around it. It’s often said that ER results in the lowest tax rate many of us face, short of dying! Slightly more seriously, if the business and individuals qualify, the prospect of facing only a 10% tax “hit” has focussed minds on doing deals in order to lock-in the net-of-tax sum. That’s fine but don’t assume that you’ll get the relief: take advice.
Finding a purchaser
It is not uncommon but it is relatively rare for someone to buy a business in a sector they know nothing about. Those sort of deals are more likely to be financially, rather than commercially, driven. In most cases, the buyer will be someone in broadly the same line of work or someone already at the business – someone known to you, in many ways. So, if the prospective buyer is known to the seller, why do the majority of people engage an outsider to help with the sale?
Among the reasons for that are
– It’s hard to sell businesses, and it follows that it is better to have someone who “knows the ropes”
– This may be the biggest transaction that you will ever do. Would you trust your finances to someone who may never have done one of these before (i.e. you) or who might become too emotionally tied up in the deal (i.e. you)
– External people are deniable. They can ask and say things that sellers often can’t, particularly if you have an existing business relationship with the buyer.
Selling your business is not the kind of thing that can be done on a Purple Bricks type of site, if in fact one exists: businesses are just too complex
To be continued…..