How to sell your firm

By Ian Leaman, July 8, 2010
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I've helped successful entrepreneurs to sell their businesses for over 20 years. Despite the harsh business environment, great businesses are being snapped up. This is because so few good businesses are available. Here are my top 10 tips to achieve a successful business sale.

● Engage a top adviser

As an entrepreneur, you negotiate all day long; it's what you do. Don't be fooled into thinking that selling your business is as straightforward. The process is fraught with difficulties. An experienced hand to guide you is essential because a trip at any stage is likely to be catastrophic. An experienced commercial adviser will help you find the best buyer and deliver the best terms. Expensive, but worth their weight in gold.

● gain psychological advantage

Having a psychological advantage is key to success. Many tried and tested techniques, such as competitive bidding, send signals that the buyer will have to bid high and deliver.

● Get housekeeping right

Boring though it may be, get all the paperwork in good shape. l Understand the competitive landscape

Make the case that your business enjoys sustainable competitive advantage over its competitors. A SWOT analysis will help.

● Be realistic about value

"What's my business worth?" is often the first question. The real answer to this is: "Whatever a buyer is prepared to pay". Since you don't know what that is at the outset, estimate using valuation methodologies.

● Don't forget the tax bill

The tax man is going to get his hands on a big slice of your gains. The recent emergency budget wasn't all cuts - the Entrepreneurs' Relief extension could slash your tax bill by £300,000.

● Preparation

Be ready to deal with issues before they become problems. Don't underestimate the detailed scrutiny coming from the buyer and have answers in a clear and verifiable form, well in advance.

● Eye on the ball

The process takes 6-12 months, absorbs huge amounts of time and is emotionally draining. Be prepared to keep the business in top shape whilst being distracted for long periods.

● Shares are not seductive

Beware of swapping your shares for someone else's. Try turning someone else's shares into cash and you might be in for a nasty surprise.

● Take the money and run?

Buyers will expect a seller to remain working in the business sometimes for up to several years. Expect to be 'locked-in' with a strong financial incentive to ensure you grow the business after it's sold.

Ian Leaman is a partner at Buckingham Corporate Finance; ian.leaman@buckinghamcf.com

    Last updated: 11:17am, July 8 2010