Whether you’ve spent decades creating your company and want to take a break, or you’re ready to let go and try something new, buying and selling a business or business idea isn’t a choice to be taken lightly, even if it’s done online.
A good exit strategy necessitates extensive planning to ensure the best potential valuation and a suitable buyer to take over. Changing business ownership raises various legal and tax issues, which is why our specialists are here to guide you through the process of selling your firm.
In this article, we will go through the step-by-step procedure for selling a business in the UK, factors to consider when selling a business, factors to consider when buying and selling a business idea online, and different methods of selling a business.
Choosing The Right Time To Sell A Business
Businesses and the environments in which they operate are continuously changing. When it comes to selling a business, it may be advantageous to try to time your sale so that business and marketing conditions are favorable. A favorable moment to sell includes a period of high profitability for the business or a strong economic market with a large number of eager prospective purchasers.
Step-By-Step Guide for Selling a UK Business
You’ll probably want a strong and capable staff on your side to deal with the many facets of selling a UK business. Each phase of the process should be handled by the person with the highest expertise in that area.
#1. Establishing Expectations And Goals
This is a lengthy and complex process that requires mental clarity and the ability to deal with pressure and stress. Perhaps you already have an optimal number or a deadline by which you want to close the business; knowing this goal will help you focus your approach and roadmap.
#2. Get Your Business Ready for Selling
It is critical when selling a British business to make it as appealing to a potential buyer as possible. It’s similar to preparing a house for sale in the real estate market: you want it to portray itself as the best it can be. However, here are a few suggestions:
- Create a formal, robust corporate and team structure that will entice buyers.
- Replace or repair any damaged infrastructure (buildings, equipment)
- Organise all of your leases and contracts.
- Reduce your spending
- Give your management team ownership obligations in stages.
#3. Tax Research
Assume the best-case scenario occurs, and you make a large profit upon selling your UK business. If your capital gains exceed your tax-free allowance, you must pay capital gains tax (CGT; see HMRC’s instructions). However, you should be prepared for any tax breaks that may minimize the amount of tax you end up paying.
#4. Sales Timing
Maybe you have a potential buyer or a deadline in mind. Timing is important when executing the deal. For example, it’s usually best to sell your business when you have high profits because this incentivizes buyers to grab your business while it’s hot. Another parallel example is when your market is growing and there is a greater appetite for deals in that sector.
#5. Get a Business Valuation
This is analogous to a solicitor evaluating your home before placing it on the market. You want a concrete asking price for your business, weighted according to key factors such as your hard assets, projected earnings, the strength of your brand, and the industry itself. There are several ways to get a business valuation, but it is helpful to have specialists who can provide professional estimates with detailed summaries.
#6. Create a Sales Brochure
This begins with a very concise single page designed to hold attention, focusing on the main headlines such as your industry, key selling points, location, revenue, motivations for selling, and potential for expansion. This can lead to more information regarding your leases, other assets, business, and site before any exchange.
#7. Perform Your Due Diligence
There is more preparation required, but your buyer will be doing their preparation by researching your business, so you must be prepared for this part of the process. Look for any serious chasms or loopholes that will make your business an unappealing prospect. So you should have a legal professional or a qualified accountant organise this part of the process. Debts and liabilities either eliminate them or make it abundantly evident that you have them.
#8. Find a Buyer
Using a business broker can help you with advertising and selecting the right buyer. If you choose an agency to sell your UK business, make sure that you thoroughly audit them and go through their terms and conditions. You should also take steps to keep the selling of your business secret and anonymous so that your competition isn’t aware of it.
#9. Use a Broker
If you decide to use a broker, this person will mediate the exchange between your buyer and you, as well as assist you in finding a buyer and negotiating the best deal. In exchange for their services, they will charge you a fee, which is typically between 1% and 10% of the total business value.
#10. Bargaining
When the buyers start pouring in, the first step is to contact those who want to negotiate so that you don’t lose a deal before it has a chance. Negotiation is a two-way street. You should have some wiggle room to lower your price, but make sure you have a hard minimum. Check that your buyer can afford to buy your business so that the transfer goes easily and without hitches.
#11. Sale
Now that you have made your agreements to transfer ownership of your business, you must carry out the sale effectively. Aspects to be aware of include the price, completion deadline, terms and conditions, and any well-off clauses. Because this is a very complex document with many aspects, it should always have the involvement of a solicitor—no different than selling property.
#12. Post-sale
Once agreements have been made concrete, be clear with your employees about when the transfer will take place, how it will affect them, and what resources they can use to cope with the changes. After the sale, you must pay any tax-deductible amount that exceeds your allowance. Try not to spend any earnings too quickly so that you know you have enough money to handle the taxes.
Different Methods of Selling a Business
There are several ways to sell a business; which one is best for you depends totally on your goals as a seller and is influenced by the type of business and other relevant considerations.
#1. Trade sale
Selling your business to another business, such as a rival, is referred to as a trade sale.
#2. Transfer to an Employee Ownership Trust (EOT)
This entails selling a business’s controlling ownership to a trust established for the benefit of all employees.
#3. Management Buy-out
When the existing management team joins forces to purchase entire or partial ownership in the business for which they work,
#4. Management Buy-in
When an external management team, sometimes chosen by the business owner, enters the picture and purchases a controlling stake in the business,
#5. Initial Public Offering
When shares of a business are sold to institutional investors and the general public and listed on a stock exchange, this is known as an initial public offering (IPO).
Factors To Consider When Selling And Buying A Business Idea Online
Remember that selling and buying a business idea online requires careful planning and effective communication. When selling and buying a business idea online, consider the following factors:
#1. Market Research
Before buying and selling a business idea online, ensure that the idea is researched and well backed up by data. As a buyer, you should always request to see evidence of market demand.
#2. Clear Communication
Being able to communicate your business idea is one of the potential skills of a seller. Use concise language and speak fluently. Make it brief and straight to the point, clearly stating the values, proposition and potential benefits of your business idea.
#3. Protect Intellectual Property
Always follow the necessary procedures to protect your intellectual property before sharing very sensitive details (non-disclosure agreements) if necessary.
#4. Online Platforms
When selecting an online platform through which to communicate with potential buyers and merchants, Check if the internet platform is user-friendly and safe.
#5. Documentation
When selling or buying a firm, comprehensive documentation should be completed. A company plan, financial estimates, and any other legal agreements are included in this documentation.
#6. Valuation
Your company’s worth should be determined by its potential, assets, and market conditions. The business concept should also be negotiable.
#7. Legal and Regulatory Compliance
The business concept must comply with all applicable rules and regulations. Seek legal counsel if at all possible.
#8. Feedback and Questions
Prepare to professionally address queries from potential buyers or sellers from all perspectives.
#9. Negotiation Skills
It is essential to develop excellent negotiation skills to create mutually beneficial agreements when buying and selling a company’s business idea online. Prepare to compromise while also protecting your interests.
Reasons For Selling a Business
Selling a business is a complicated process that demands meticulous planning and consideration. There are numerous reasons why someone may choose to sell their business. Among the most common reasons are:
#1. Retirement
One of the most common reasons for selling a business is retirement. When the time comes to leave the world of work, the best option is to sell your business if there is no one suitable or willing to take over. The advantage of selling due to retirement is that there is often plenty of time to plan an exit strategy.
#2. Owners/directors’ Health
Unfortunately, there may come a time when your health prevents you from running your business. Many small businesses can attribute their success to the owner’s hard work and dedication; however, if the owner is unable to continue playing an active role in the operations, the business may suffer. When your health forces you to sell, time is of the essence.
#3. Owners Want To Try Something New
It’s possible that the owner has had enough of running a business and wants to try something completely different. Running a business takes time and effort, and there may come a time when a break, either permanent or temporary, is required.
#4. Owners can Anticipate a Decline in Profitability
It is natural to want to exit your business before the decline begins if you believe it has reached its peak of profitability. This is a common reason for a business to be sold, so as a buyer, you should do your due diligence and take future financial projections with a grain of salt.
#5. Concerns About Changes in the Industry
This could include new legislation, a general regional downturn, or political factors such as Brexit. This is yet another reason why prospective buyers should conduct extensive research before purchasing a business.
What is The Best Tax-efficient Strategy to Sell a Business in the United Kingdom?
One of the most important strategies to lower CGT on the sale of a business is to qualify for business asset disposal relief (BADR), formerly known as entrepreneurs’ relief, which decreases the rate of tax paid on the sale of eligible business assets to 10%.
How Much Does It Cost to Sell a Business in the United Kingdom?
A typical broker charge for selling a business is from 1 to 10%. This is related to the sale price; therefore, the greater the price, the lower the fee. If the broker charges 5% on a final value of £1 million, you will pay £50,000. While business brokers offer useful insight, their fees might cut into your profits.
How May I Withdraw Funds From My Business Without Paying UK Tax?
Investing in a pension fund is one of the most tax-efficient ways to collect revenues from a business. Making pension payments avoids Corporation Tax, Income Tax, and National Insurance payments, as long as they are less than the yearly allowance for tax-free pension contributions, which is presently £60,000.
Do I Need to Hire a Lawyer to Sell My Business?
It is not required to engage a solicitor to sell a business, although it is strongly advised. Selling a business is a complicated process, and a solicitor will assist you in preparing the business for sale by ensuring that all contracts with customers, suppliers, and workers are current.
How Do You Determine the Worth of a Business to Sell?
Subtract your total assets from your total liabilities. Because it comes directly from your accounting or record-keeping, this method makes it simple to trace back to the valuation.
Conclusion
To recap, selling your UK business requires various processes to be accomplished in a precise order. An experienced lawyer and business broker can help you complete the processes outlined above swiftly and efficiently. Notably, each stage takes time and consideration because any mistake (such as undervaluing your firm) might cost you thousands of pounds. Finally, keep in mind that selling a business is an emotional as well as a financial transaction.
Related Articles
- Amazon Business Prime: Pros, Costs And Requirements
- Top 9+ POS Machines for Small Businesses 2023
- 8+ Best Card Machines For UK Business 2023
- Direct Line Business Insurance Review
- Zettle Review: Is It Right for Your Business? (2023)
Reference
