If you’re a business owner it’s possible that, at some stage, you may well decide to sell up.
The reasons for this will vary. You may well think it’s time to start winding down your financial affairs prior to retirement. Alternatively, you may be planning to move on to a different financial venture or return to your home country.
No two exit strategies are the same – how you sell your business will be unique to you so there isn’t a “one-size-fits-all” solution.
Make sure you have a plan in place
The key to making any major financial decision is to ensure you have a well-considered plan in place before you start.
When it comes to selling your business, it’s imperative to have thought through all the issues and put a detailed plan together. It’s likely to be one of the biggest decisions of your working life, so you need to get it right.
Your plan will be dictated by whatever your next steps are. This means that it’s all-important that the sale process leaves you in the best possible position in relation to your wider plans.
Listed below you’ll find some key questions you should ask yourself if you’re thinking of selling up.
1. What are your financial objectives in terms of value?
If you’re selling your business, it’s likely that you’re going to lose your main source of income.
So, you’ll need to take steps – early on in your planning – to work out how much you’re hoping to gain from the sale.
This will especially be the case if you’re planning to retire, and you intend to use the sale proceeds to provide some of the money you’ll be living on in your retirement years.
It will need careful thought. Set the bar too high and you may struggle to find a buyer. Conversely, if the figure is too low you may be selling yourself short and not get the amount you deserve.
2. Is your business ready to sell?
A key part of the sale process will be ensuring your business is in the best possible shape to sell. Making sure this is the case could cover important issues such as:
- Ensuring data systems and IT functionality are fit for purpose
- Checking the state of the business premises
- Covering off any outstanding governance and regulatory issues relating to your business
- Resolving future employment and other staffing issues.
3. Have you taken steps to make your exit tax-efficient?
Tax is probably something you’re very used to thinking about. Now is a good time to make sure you’ve covered all your bases when it comes to the taxation implications of your sale.
Understanding your tax obligations and putting together an effective tax strategy is unlikely to be straightforward.
The tax you pay on the sale of your business could represent a significant proportion of the sale proceeds. So, it’s important to ensure your tax planning is robust, and that you take advantage of all the concessions that could be available to you.
We would highly recommend that you work with a tax expert to help you understand the sale process from a tax perspective. They will also be able to help you mitigate your tax liability wherever possible.
4. Are you planning an asset sale or share sale?
The two most common ways to sell your business are through an asset sale or a share sale.
Asset sale involves the sale of the assets held by your business. These assets can include property, land, equipment, and stock. With an asset sale you’ll still retain ownership over the legal entity of the company.
Conversely, a share sale means you’re selling your shares and so full ownership of your company.
Determining which is the right route for you to go down will depend on several factors, including the structure of the company and the tax implications of each.
You’ll want to seek expert advice to ensure you maximise the gains you make on the value of your company and end up with a sale you’re happy with.
5. Do you want any future say in how the business is run?
Clearly the answer to this question will be a key factor in whether you decide on a share or asset sale.
You may well have built the business from scratch with your own hard work, so it’s understandable if you don’t want to let go entirely, or phase your departure.
So, you may well want to negotiate a handover period as part of the sale process – or even continue for an agreed time in a consultancy role.
Some purchasers may welcome this as a way to ensure a smooth transition and potentially maximise future business success. Others may prefer a clean break.
Either way, it’s good to have an idea of your preferred outcome before you start the sale process.
Take time to ensure you make the right steps to secure your future
These are just five questions regarding the sale of your business that you need to consider. Clearly the sale will involve far more than just these issues.
It’s important to remember that, when you’re thinking about selling your business, your situation will be unique to you, and the decisions you take could have a critical bearing on your financial future.
That’s why it’s so important to take your time and ensure you take the right steps to secure your future and look after the wealth you have created.
Ideally, you should look to start the planning process at least a year prior to your intended sale date.
Get expert advice
You’ll see that, on a couple of occasions, we’ve stressed the importance of expert advice when it comes to a sale.
As experienced financial planners, we’ve worked with many clients who have gone through the process of selling their business.
One way we’ve been able to particularly help them make a success of the sale process is by using sophisticated cashflow modelling software.
This exercise can provide useful insight into how much you might need to sell your business for. It can also model various “what if?” scenarios to help test any ideas you may have had around the sale.
Get in touch
If you’re thinking of selling your business and have any queries regarding your financial planning arrangements, please get in touch with us.
This article is for information only. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances. All contents are based on our understanding of HMRC and Australian legislation, which is subject to change.
The information in this article is general in nature. It does not take into account your specific circumstances and should not be acted on without full understanding of your current financial situation, future goals and objectives by a fully qualified financial adviser. In doing so, you risk making commitment to a product and / or strategy that may not be suitable to your needs