If you own a business, you may be wondering whether now is the right time to sell, what your business may be worth, how you would go about it and what sort of deal you might get?
This is a complex subject and everyone’s circumstances are different, but here is some general information you might find useful.
If this is something you are considering then I would urge you to take legal and financial advice from suitably qualified professionals.
Is this the right time to sell?
We are living in unprecedented times with an extremely uncertain future. If you’re not in a hurry to sell then it might be better to ride the storm if you think things will improve eventually and you can wait. Not every business is doing badly at the moment and sectors will recover at different rates so you need to weigh up your own circumstances.
If you are looking to retire you may feel that you have little choice.
It is definitely a buyers market though! There are a lot more sellers than buyers in the market at the moment.
Get some advice from your accountant if it is something you are considering.
What could my business be worth?
Typically businesses are valued on a multiple of their profits, the value of their assets, or a combination of the two.
The bigger and more profitable the business is, and the more stable and predictable it is, the more it is going to be worth.
Due to the current uncertainty and the large number of businesses going into administration at the moment, it is unlikely to be worth what it was 12 months ago but every business is unique and some could be worth considerably more.
How would I go about selling my business?
This rather depends on a few key things:
- How quickly do you want to sell?
- How much effort do you want to put into finding a buyer?
- Is there anyone in your network who might be interested?
- Your views on using business brokers and their fees?
Going to a business broker is probably the traditional way of selling a business. There are plenty of good brokers around and typically they will charge you a marketing fee and a percentage of the sale price. Both vary so shop around, although it is probably a false economy to just go with the cheapest. These fees will definitely eat into the money you get for your business though.
Advertising your business for sale without a broker is a way of avoiding broker fees and your accountant can probably help you here. Websites like The Business Sale Report contain listings of thousands of businesses for sale, in administration and liquidation. It’s a bit more complicated than selling a house or car but it could work for you and save you money. However, you might consider that the value a professional broker can add to the process is worth the cost.
Selling to private investors is another option to consider. For bigger businesses there are a lot of Private Equity firms investing in most sectors of UK business. There are also smaller independent investors who all have a niche they are investing in. For us it is professional & financial services but there are others investing in just about every sector you can think of.
What sort of deal would I get?
It is unlikely these days that someone is going to come along and wave a big cheque under your nose, so if you are expecting a big cash pay out you might want to think again.
Most deals these days involve deferred payments where you get a fair value paid out over a period of time, typically 3 to 5 years. Having these regular payments is a bit like being paid for carrying on going to work, except you don’t have to.
Entrepreneurs relief has recently been changed, but may still apply to a potential sale so be sure to get good professional tax advice.
Good luck and stay safe!