Have you had enough? Ready for a new challenge, the open road or a desert island?

Are you ready to relax or feel that you have achieved what you needed to in your existing business?

It may be time to consider winding down and enjoying the rewards of your efforts.  However, as the owner, in order to achieve this you need to sell your shares.  You could wind the company up, but given all the hard work you have put in, you will probably want to see it sail off into the future.  Even if you are not quite there yet, if you picture yourself retired on a desert island in anything less than 5 years time, now is the time to start preparing.

Depending on your family situation or the business’ management structure internal succession may not be possible.  Therefore you will need to prepare for an exit via trade sale.

This method of exit means you will be dealing with people who do not know you and your business and therefore things that are second nature to you will need to be communicated.  Spending time preparing now may seem premature, but it will save time and stress in the long run.

The intention of the preparation is to present as good a picture as possible to a potential purchaser.  A bit like when trying to sell your house, you want them to be able to see what it would be like with them living in it by painting a financial picture of how the business runs and how much money they could make.

Key preparation actions include the following

• Review your recent historic accounts objectively
• Are there exceptional costs or costs which could reasonably reduced with a bit of care?
• Consider your level of drawings – a few pounds left in the business now could mean a higher sale price and a lower tax rate
• Clean up the presentation of the annual accounts and ensure they are filed on time
• Ensure management financial information is prepared regularly
• Consider possible cost savings for a potential purchaser so “adjusted” figures could be presented
• Critically assess your role
• Are you using people to the best of their ability? Could they help run the business while you focus on this, perhaps even turning into a succession option?
• Would a new purchaser need to replace you or could the management team provide the onsite resources?
• Start to document your knowledge of the business and the processes used to run it. Then start to delegate them. Can they be improved?
• Market the business
• Consider your network of contacts, suppliers and competitors for potential purchasers
• Do some research on any potential purchasers to assess those more likely to be interested e.g. flat sales but profitable (might be considering expansion), spare cash on the balance sheet (might be looking for an investment)
• Prepare a 2 page anonymous profile for the business showing business profile, customer base (names or sectors), basic financials etc that can be sent out to potential purchasers or entered on deal databases which are regularly sent to intermediaries. This is a key marketing tool to gain a level of interest.
• Prepare a more detailed Information Memorandum that could be issued to potential purchasers (following signature of a confidentiality agreement) which should include more detailed financial information, customer lists, details of contracts, supply agreements, order book etc.

This in some ways will be the easy bit.  Having a potential purchaser pour over your business, undertaking due diligence can be challenging to a person not used to having their decisions questioned and therefore it may be helpful to get an advisor involved to manage the negotiation process.

Whilst this article emphasises the actions needed to prepare for a trade sale, do not underestimate the importance of maintaining your attention on the business itself – there is no point doing all the work and getting to the point of sale to look around to find that the business has gone backwards while you were distracted.  Seeking assistance at an early stage could provide you with the support and the ability to focus at a key time.