When it comes to selling your business, there are a range of factors that need to be assessed: Will this benefit you in the long run? Are you ready to sell your business? Deciding on the right process is crucial. We set out some of the considerations below.
A sale can be the perfect solution if you no longer wish to be the owner of your business, either because you’re approaching retirement or just because you want time to focus on a new passion.
Do you want to stay on in any capacity?
You may be able to negotiate an arrangement whereby someone else takes over as the owner of the business but you stay on as an advisor or consultant. This can benefit the purchaser, as it can ensure a smooth handover without losing the key person’s skills and knowledge, and means you keep a hand in while you explore what’s next for your career.
Does the sale restrict you from working?
If you want to sell and retire overseas, your focus may be almost predominantly on the price. If, however, you’re looking to sell so that you can pursue a new business that is similar to the old, be wary of provisions such as non-compete clauses. These often arise in the course of a sale, and may require the outgoing owner to sign an undertaking not to start a new business or provide consultancy services to competitors for a given time frame. You should obtain legal advice on the terms of any sale contract from a qualified lawyer.
Is now the right time to sell?
You’ll likely attract more buyers and a higher price if your business is in good shape, so keep your financial records up-to-date and consider an external audit if you haven’t had one in the past couple of years. Any potential buyer will also look closely at the staff you have in the business, so it’s worth making sure they’re performing well and putting their best foot forward when a purchaser starts undertaking their due diligence.
How will you handle the proceeds of the sale?
Like any major financial transaction, it’s important to ensure that you structure the sale of your business in a way that is the most effective for you. Some purchasers may be happy to buy the business outright, while others may want to purchase in instalments.
These different options may have different tax consequences, or even impact your long-term personal financial situation. Before you start negotiating with a buyer to purchase the business, it may be helpful to know how you would prefer the proceeds to be structured so you can direct the discussions to your advantage.
The decision to sell your business can be a complicated one, so consider obtaining professional advice (including tax and legal) where necessary.
To learn more about the general strategies you can employ for a successful sale, please contact us.