Preparing your business for sale is more than a transactional process – it’s a strategic journey that can protect and maximise the value you’ve built in your company.
Here’s a practical roadmap of 6 steps to help you prepare.
1. Develop a Clear Exit Strategy
A clearly thought-out succession plan is vital. Whether you’re planning to step back gradually or sell outright, your objectives need to be defined early.
It’s crucially important for effective succession planning to define your business vision and goals. Start by asking:
- What’s the purpose and mission of your business?
- What are the values and principles guiding your decisions?
- What are your medium- to long-term objectives?
- What personal and commercial goals are you aiming to achieve?
Having a clear strategy helps align expectations, guide decision-making and communicate them effectively with stakeholders. It will also not only help you evaluate the performance and progress of your business but also protect its value.
2. Identify Successors or Buyers
Who is most likely to take over the reins? Consider the potential candidates for taking over your business:
- Family members or current management team – Evaluate their skills, strengths, weaknesses, interests and aspirations. Are there any steps that you could take to prepare them for the challenges and opportunities which lie ahead?
- External buyers – A sale to a trade buyer, private equity backed buyer or an employee ownership trust (EOT).
Each path presents different considerations. For internal candidates, assess their skills, commitment, and development needs. For external buyers, be aware that buyer type will shape the deal structure and due diligence expectations.
3. Conduct a Pre-Sale Business Health Check
Buyers will scrutinise your business from all angles – legal, financial and operational. You can get ahead by conducting your own pre-sale audit to understand and prepare for any barriers that you may come across in the sale process.
Buyers will want comprehensive information on legal, financial and operational due diligence, such as:
- Financial accounts and tax compliance
- Corporate structure and legal status
- Contracts with suppliers and customers
- Employment terms and HR documentation
- Property ownership and leases
- Intellectual property rights
- Regulatory and compliance documentation
Getting a head start on the process by carrying out a detailed assessment of your business (including all of the areas referred to above) and making sure documentation is comprehensive, accurate and organised will assist attracting potential buyer and with a smooth sale process.
Key matters for you to consider and prepare:
- Ensure all assets (including real estate, tangible assets and intellectual property) are owned by the company/business. Identify any assets which will be excluded from the sale.
- Update employee contracts and HR policies with appropriate terms and conditions.
- Check all contractual documentation (including terms and conditions and key contracts) is up to date. Identify any contracts which have any restrictions on assignability or a change of control.
- Resolve all existing business issues (such as supplier or customer disputes or known business inefficiencies or HMRC investigations).
- Verify all regulatory requirements are complete and up-to-date, such as regulatory filings, consents, registers and records.
- Document standard operating procedures (SOPs).
- Consider preparing clear and accurate financial projections for the next 1-3 years. Well prepared management accounts and year-end files can speed up the due diligence phase.
You may even benefit from creating an information memorandum (or ‘sales pack’) to outline your business and its financials, operations and strategic advantages. This can be a strong opener to share with serious buyers and get a foot ahead in negotiations. It’s a message to show your preparedness.
4. Strengthen Your Management Team and Key Employees
An experienced and capable management team reassures buyers. Key employees will also be key to the success of any sale. They can also play an important role in helping build up value in the business.
If the business is overly reliant on you, a buyer will have concerns about the handover of key customer and supplier relationships and the continuation of day-to-day activities. Empowering a wider leadership team, and formalising key roles and responsibilities, reduces this risk and demonstrates resilience.
If you’re heavily involved in daily operations:
- Start to delegate responsibilities and core functions
- Invest in training and development for key employees
- Document relationships with clients and suppliers to ensure smooth handover
Overall, reducing reliance on the current owner will increase the business’ attractiveness and valuation.
5. Appointing the Right Deal Team
Surround yourself with advisers who understand your sector and your objectives.
Your deal team should include:
- Corporate lawyers with M&A experience
- Tax advisers to optimise the structure of your assets
- Accountants to ensure accurate financial reporting
- Corporate finance advisers who understand your industry, to support valuation and negotiation
6. Plan for Tax Efficiency
A business sale can present a significant opportunity for personal wealth creation, so integrating estate planning into your exit strategy is key to securing long-term financial security.
Taking effective tax advise planning to ensure that your assets are structures tax efficiently to create the best available outcome for you and your family is recommended, via personal and family wealth preservation.
Understanding the current legal situation around reliefs such as Business Asset Disposal Relief (BADR) ensures you’re making the most of the opportunities available to you.
It is also key to have legal advisers who are able to guide you through the sale process, concisely explain the terms of the deal you will be entering into and negotiate to minimise your exposure.
Final Thoughts: Prepare Early, Exit Smoothly
Planning is the key to a successful exit. Careful preparation and using the professional resources available will be key to giving yourself the best possible opportunity to maximise your return and minimise your exposure.
Napthens can support you through any sale ensuring you can pass on your business in a smooth and effective way.
To contact us for legal advice on selling a business, please use our contact form.
How Napthens Supports Business Owners
With a proven track record of helping business owners transition from business to personal wealth Napthens award-winning corporate team can help you plan and manage your sale from start to finish, providing peace of mind throughout.
Napthens’ corporate client base is international, and our key corporate offices and contacts are:
- Preston
- Blackburn
- Liverpool
About the Author
Victoria Bromiley, Senior Associate Solicitor at Napthens, has supported many businesses through the sale and succession planning process.
Victoria has a host of experience acting for private limited companies, owner managed businesses and individual shareholders as well as acting for PLC clients on acquisitions.
Victoria also leads Napthens’ Employee Ownership Association membership.
If you have any questions about this article, please contact Victoria at victoria.bromiley@napthens.co.uk or telephone: 01772 904228
Victoria Bromiley | Senior Associate Solicitor
Victoria Bromiley is a senior associate solicitor within the corporate team, based in the firm's Preston office.
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