Looking to sell your business? Selling can be an effective way to achieve financial objectives that will enable you to progress to the next chapter of your life or career.

At EFM, our team of outsourced Finance Directors (FDs) and other Finance professionals have helped many business owners get the best price for their business sale.

The reality is that selling a business isn’t an instantaneous, simple, or guaranteed process. Therefore, it’s crucial to prepare early and get the right help and expertise in place from the start.

It takes a long time, often up to three years, to shape your business and to collate and present the financial and organisational data that will make that business attractive to a buyer and secure you the highest sale value possible.

Here’s how we help.

Financials, the buyer will want to see

Firstly, it’s about producing reliable and understandable financials that highlight the company’s historical performance – and tell a compelling story about its productive and resilient track record.

Secondly, it’s about drilling down into the detail to find and showcase the metrics the buyer will be looking particularly closely at to establish the value of the business and its worth going forward, including robust financial forecasting.

Take a Software-as-a-Service (SaaS) business, for example. By its nature, it has little or nothing in the way of physical production costs, achieves typically high margins on its sales, and tracks metrics constantly as part of its online subscription operating model – all highly attractive characteristics to a potential buyer.

We would therefore look to extract maximum value from those metrics by calculating the value they add, and turning this into the kind of financial story around margins and profitability that we know a buyer in this space would want to hear.

But as every business and its prospective buyer are different, we take the time to understand both in every case.

Pointing to growth potential

At the same time, it’s important to remember that those who buy businesses do so not just because of what the business has delivered in the past, or how it performs currently, but how it is likely to fare in the future. After all, the buyer is looking for a return on investment, not stagnation.

To help with this, we help you produce business plans that showcase your business’s growth potential and highlight sales and marketing practices and processes that will help to drive growth.

These are based on solid and rigorous projections that will stand up to scrutiny by the buyer (and their accountant).

Fighting your corner on value

Maximising the value of the sale is what, ultimately, it’s all about, so on this front too we make sure you and your business are well prepared.

We focus on several factors here that can potentially send strong signals to the buyer, including:

• Your business model- What’s the balance between recurring and one-off revenue, for example, and what might it express about the business’s prospects? Recurring revenues bode better for predictability and stability, so we will always make sure they’re front and centre in your financials.

• Contracts and liabilities- Customer and staff contracts can unwittingly contain liabilities that potentially expose the business to risk – something a buyer may exploit in order to bid low. So, we work with legal specialists to update contracts and ensure gaps are closed.

• Accounting issues- Accounting accuracy in smaller businesses frequently needs a reboot to pass muster with a potential buyer, so we pay particular attention to directorships, family involvement, loan accounts, and application of accounting policies – all of which can often benefit from being revisited.

• Tax breaks- Maximising net proceeds after tax can help paint a significantly stronger financial picture in the eyes of the budding buyer, so we work with you to help you and your business get the right tax advice and put in place all eligible reliefs. As just one example, Business Asset Disposal Relief (BADR) can be worth a 10% saving on Capital Gains Tax for the first £1 million of disposed-of assets, reducing the seller’s tax liability and increasing their net of tax exit proceeds.

Confidence in the buyer vs. buyer confidence

You must be sure of your potential buyer’s viability and trustworthiness as proceeds of exit are often paid over a number of years after you’ve sold your company. So at EFM, we make it our business to perform financial due diligence on the acquiring business or individual to probe where the buyer’s funds are coming from, and any risks associated with them.

Are loans involved, for example? If so, do the buyer’s cash flow forecasts look like the buyer will be able to service the debt once the sale is complete?

At the same time, trust works both ways: the buyer must have confidence that the business will continue to function and grow when its charismatic leader is no longer part of it.

To this end, we also advise you on how best to secure this trust, including putting in place team expansion and succession planning, recruitment strategies, and systems investment – all of which may be necessary to help the business adjust to life without you and de-risk the acquisition for any buyer.

Don’t rush it – and get help

In short, selling your business could be the most wealth-generative thing you’ve ever done.

But if you try to rush it, or go it alone, the complexity and intensity of managing prospective buyers’ demands for data and information – and their inevitably critical responses to it – are likely to leave you not only exhausted, but short-changed.

For more information on how EFM can work with you to take the risk out of selling your business and ensure you get what you deserve for it, get in touch.

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