With fears of a double dip recession compounded by the UK’s snail’s pace growth forecast over the next two years, the pull of shutting shop and jetting off into the sunset has never been stronger for many owners.
Simon stresses that while an exit is appealing and relatively tax efficient - particularly in light of the increased national insurance deductions and 40 per cent tax band impacting on middle earners from April 6 and 50 per cent band for higher earners, selling now may not achieve the highest price in light of the challenges of obtaining finance in a depressed market.
The questions below are designed to give buyers some ‘food for thought’: 1 What will you
do when you have sold the business - and how much income will you need? Many owners are in such a hurry to exit that they fail to plan for the rest of their lives - to the detriment of their families and friends. Are you prepared to be locked in for a period of time - you might achieve a better return if you are? 2 What grooming
does the business require? It can sometimes take up to five years to sell a company so start preparing now. Does the firm enjoy a high profile? It’s been proven time and again that a well-marketed business increases its chances of attracting a suitable buyer. 3 Have you established
exactly what you are selling? Are you selling the company lock, stock and barrel or are you selling a list of clients, goodwill, and a strong order book? Do you own the building you operate out of and is this also included in the deal? 4 Who is your
ideal purchaser? Is it a player within the food sector or do you want to sell the business to your managers in a Management Buy Out (MBO)? 5 Do you have
the right people on the bus - whether or not you undergo an MBO? What skills and talent do key employees need to keep the company firing on all cylinders while your time is taken up with what can be a painstaking sale process? 6 Do you have
the right professional advisors? Selling a business can be a lonely process and many sellers bemoan their choice of advisors. Do not attempt to sell the business without the best advisors and ensure your accountant and lawyers understand the ‘bigger picture’ and are highly experienced in similar transactions. Talk to those who have previously commissioned them and learn from their experiences. 7 How will you
value the business - and what multiples of the net profit do you expect to receive? Value your business with the help of a professional before you start to sell it. 8 Are your processes
and financial documents up-to-date and accurate? Prospective buyers will expect to see accounts for the last three years and will appreciate receiving monthly management accounts over the same period. Also remember that buyers are often attracted to the potential of the business. 9 Are you aware
of the tax implications? They can vary depending upon the structure of the company and your accountant will advise you on how to structure deals, which will avoid the seller incurring enormous tax bills. 10 How will you keep
the sale under wraps? This is critical to prevent issues arising such as negative attitudes from employees, customers and suppliers.D This is only an overview and for information purposes only. It is not a substitute for specific professional advice in your own circumstances. You are recommended to obtain specific professional advice from a professional advisor before you take any action. No action should be taken without consulting detailed legislation or obtaining advice.
Simon Young is director of Montpelier Chartered Accountants, which has 12 offices across the UK and specialises in advising and supporting the food sector and manufacturing industries.
For further information visit www.montpelierchartered.com