It takes a lot to build up a business from scratch and turn it into something profitable and something you can be really proud of. As the founder, your business is like your baby and you go through a lot with it in its various stages of development, from the lowest of low points to the sheer joy that comes with profits and perhaps also from being able to employ some people and make a positive contribution in that way.
For many reasons however, the time to sell may come and it may as well even come sooner than what you may have imagined. You could perhaps grow tired of having to micro-manage every employee or you may indeed have plans of an early retirement. Perhaps you want to fund another venture and enter into a different industry altogether, or you might even want to invest your money passively and live off returns which require less of your direct day-to-day involvement. Whatever your reason for wanting to sell, it’s not just a simple matter of money changing hands and the ownership of the business getting amended.
This is something to take note of whether you’re the buyer or the seller because it does indeed apply to both parties involved.
Money is but just one small part of the process involved in buying or selling a business, although it is indeed perhaps the most important part. What business owners need to know is that actually putting a business up for sale, or merely starting the process of selling it, takes quite a bit of time. You can have an offer come in suddenly – an offer which you just can’t refuse, but you’ll still be in for a lengthy due diligence process from the data of the initial offer the notification you receive from your bank that the funds have cleared.
An important factor to consider is the seller’s legal obligation to ensure some continuity in the business, particularly if the new owner plans to keep much of the same operations running. This may entail divulging some sensitive information, which is something that needs to be done strategically. I mean you never really know if the so-called interested party is in actual fact a competitor who’s actually just posing as a willing buyer in a bid to get some trade secrets from you. Trust me, this sort of thing happens a lot more than you may think.
Protecting yourself against such practices means you have to bring in some legal expertise, which in itself is an added expense. There’ll be plenty of added expenses you’ll have to prepare yourself for and chances are the final valuation of your business won’t be anywhere near what you might have initially thought.
The best way to prepare for the sale of a business is to operate it like you’re never going to put it up for sale, in that you’re operating it in the best way possible to keep it running profitably. This way, whenever an offer does come in, all your affairs are in order, including all the bookkeeping, which always makes the sale of a business a much more streamlined process.
Katie is a finance specialist with one of the biggest firms in London. From savings to investments, there’s nothing she can’t advise on and she’s here to help spread the word and help you on your way to financial freedom.