Selling a business you may have spent years toiling in is not something to be approached lightly. WHN’s commercial partner, David Buskey highlights the six rules you can’t afford to ignore:
1 Know what the business is worth. Get advice and a valuation, don’t just rely on gut feeling as to what funds you could attain for the business.
2 Have early conversations with your lawyer and your accountant. You may have a sale price in mind but you also need to understand how much tax you may have to pay once the sale has gone through – how much money will you actually have once that has been paid?
There are numerous ways of structuring a sale, and usually the main driver is coming out of the process with as much of the sale money as possible.
3 If you have business partners or other shareholders, consider if you have ever entered into any agreements, perhaps giving them the option to buy you out. You may well be obliged to follow those agreements even if they were agreed some time ago. An expert solicitor can help you understand the complexities of the contracts already in place.
4 Any buyer who doesn’t have expansive knowledge of the business will want to see lots of sensitive information to weigh up what it may be prepared to offer. Don’t release any data unless the buyer is willing to sign a confidentiality agreement to keep it secret. We can draft that document for you.
5 The key terms of any deal should be summarised in writing and these form the basis of the actual contract. These are called the ‘Heads of Terms’. Speak to your solicitor before agreeing the Heads so you then won’t need to go back to renegotiate too much after you have confirmed the deal.
6 You may not necessarily receive payment in full for the business on completion of the sale. In tricky economic times a buyer may not be able to get all the money together up front. Alternatively the buyer may have some doubt as to what should be paid and suggest a lower initial payment with the prospect of future payments depending on how profitable the business is going forward. There are a number of ways a buyer may offer to pay but this brings with it numerous risks including delayed payment, potential buyer insolvency and tax penalties which could cause you financial stress. Take advice from the experts before agreeing to payment terms.
For further guidance on all aspects of buying or selling your business contact:
Suzanne Gallagher and Nicola Phelps at our Blackburn office on 01254 272640
Gary Jones at our Bury office on 0161 761 4611
David Buskey at our Haslingden office on 01706 213356