How to Prepare to Sell Your Business when it’s Dependent on You
What’s the fuel that keeps your business firing on all cylinders? State of the art products? Superior service? Stellar reputation? Leading brand?
And YOU!
When you’re thinking about how to prepare to sell your business, be aware that potential acquirers could lower their offer or head elsewhere if they learn that the lynchpin of its success is, in fact, the owner.
Do you personally have client relationships that span the life of the business, or a significant part of it? Are other people in your business educated and empowered to make key decisions, or have you been reticent to delegate this? Does the knowledge and expertise your business readily draws upon exist mainly in your head, rather than on paper?
The answers to questions such as these should alert you as to whether your company is too dependent on you. The final blog in our series on how to avoid the pitfalls of selling a business is about how to mitigate the risk this could pose when you plan to sell up and exit.
What would the repercussions be if you left the business today? Here are 5 ways you can reduce that impact in the eyes of your ideal buyer and sell for maximum value…
Develop a strong management team who can run the business on a day to day basis
Consider how heavily involved you are in the day to day running of the business. In our free eBook SELL – The 30-Minute Guide to Preparing Your Business for Sale we ask business owners:
“Who is responsible for the sales?”
“What about key client relationships?”
“Who runs your operations?”
“What about the development of new products?”
If you’re serious about selling a business, part of the preparation to do so must include the recruitment and training of a management team to whom you can pass the baton on aspects such as sales, account management, operations, product development and finance.
By reducing dependency on you and having a strong management team in place, you’ll make the business more attractive to a potential acquirer and that will enable you to exit the business sooner rather than later. If you fail to do this, why would a buyer offer you a decent price when the main USP of your business (you!) is about to exit?
Upskill others with your knowledge and insight
Exiting a business means delegating leadership responsibility to a well-informed team of management talent. However, sharing your knowledge and insight is just as important as the delegation of management duties.
From smart inventions to niche services, business owners who keep the secret ingredient of their recipe for success to themselves will not create an attractive proposition for acquirers. Weave that wisdom into the fabric of your business. Train employees at all levels across your company with your unique knowledge – from the office, to the warehouse, factory, studio, laboratory, and shop floor.
Chances are, processes have evolved while you’ve been running the business. Customer behaviour almost certainly has. There might have been seismic cultural shifts within the industry. Share this experience and the insight it has brought along the way, to help staff write the next chapter in the history of the business.
Don’t forget to document all valuable knowledge and insight, too! This is particularly important in smaller businesses where it might be impossible to have two people for every role. A buyer will be relieved to see that there’s a way for someone to pick up business-critical tasks if a key member of staff leaves.
Preserve client and supplier relationships with contracts and strong communication
As we pointed out in our blog How to get your contracts in order before you sell a business, your buyer could be worried that clients and supplier relationships might be negatively impacted by your departure.
One way to reassure them is to provide up to date contracts that protect the supply chain and key revenue streams e.g. where your business is the preferred or exclusive supplier. That said, a contract may only last so long if there is no genuine relationship and clear lines of communication fostered between your business and the external parties upon which it relies.
In the months leading up to your exit, you should also introduce and involve relevant members of your management team in meetings with key accounts and suppliers. Plenty of face-to-face contact will build relationships and help alleviate the worry and uncertainty that transition can bring.
Work with the new owner on a consultancy basis
Despite a painstakingly careful handover and diligent documentation, there are still times you’re your exit from the business will need to be an even more gradual process.
Where there is an intricately layered level of complexity around the operation of your business – perhaps linked to major seasons and cycles within the year – your buyer could be keen on you continuing to work with them post-sale on a consultancy basis so that they can rely on your expertise for that full cycle. We highlighted this in our blog How to identify your S.P.O.F.s (single points of failure).
Shelved projects that the new owner might wish to rejuvenate, long-term projects with a complicated history, and cases to which you’re inextricably linked are also scenarios in which your consultancy can benefit the new owner. By offering this you will be able to command a higher price.
And if there is shareholder dependency, it you will certainly need to be involved as part of the transition period.
Take some time off!
We saved the best tip for last. When was the last time you took a holiday? By that, we mean a genuine break where you weren’t answering emails from your sun lounger? Probably not since the invention of the smart phone or Blackberry, at least!
As you prepare to sell a business, you will be extremely busy, so taking a break could seem counterintuitive. However, being able to show a new buyer how well the business runs without you is evidence that your involvement isn’t the be all and end all its success.
Once you have efficiently delegated key responsibilities to senior managers and shared your knowledge around the company, you need not feel anxious about stepping away for a week or two here and there. It will be the ideal way to test how well your handover works in practice.
It’s also wise for your own wellbeing. A sudden departure from a business can feel traumatic for many people – understandable when you have lived and breathed it for all these years. Time off and head space to contemplate your next chapter is healthier for you and shows potential buyers what a healthy business they are about to buy.
There will always be a transition period when you sell a business but the less dependent the business is on you the quicker and easier it will be. Entrepreneurs Hub is a corporate finance company who can teach you how to prepare to sell your business – and achieve that sale successfully. Contact us in confidence discuss your situation, receive a guide valuation, and find out how saleable your business is.
Download your free copy of our popular eBook SELL – The 30-Minute Guide to Preparing Your Business for Sale and visit our Insights & Resources Page for more tips and hints.
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FAQs – Selling Your Company
How do I sell my business in the UK?
Selling a business in the UK typically involves preparing financial information, obtaining a valuation, identifying suitable buyers and negotiating the terms of a sale. Most owners work with an M&A adviser to manage the process confidentially, approach qualified buyers and maximise the value achieved.
At Entrepreneurs Hub, we talk about five key areas that make the difference between success and failure when selling your business. Read more…
What is my business worth?
A business is typically valued by applying a multiple to its sustainable profit, often EBITDA or adjusted net profit. The appropriate multiple depends on factors including growth, recurring revenue, customer concentration, management strength, owner dependency, market conditions and buyer demand.
Determining what your business is worth involves more than applying a simple formula. Use our Business Valuation Calculator to obtain an initial valuation range, or read our simple business valuation guide to understand the factors buyers consider.
How long does it take to sell a business?
Selling a business in the UK typically takes around 12 to 18 months from initial preparation to completion, although some transactions may be quicker or take longer. The timeline depends on business readiness, buyer demand, deal complexity, due diligence and how quickly the legal terms can be agreed.
Preparing accurate financial information and organising key documents in advance can help reduce avoidable delays. Read our complete business sale timeline to understand what happens at each stage.
When is the best time to sell a business?
The best time to sell a business is usually when it is performing strongly, its future growth is clear and you are not under pressure to complete a sale. Buyers are generally more attracted to businesses with rising or stable profits, reliable financial information and credible opportunities for further growth.
Business owners are often in a stronger position when:
- Revenue and profits are growing or consistently strong
- Financial records are accurate and up to date
- Future growth opportunities can be clearly demonstrated
- The business is not overly dependent on the owner
- There is a capable management team in place
- The owner has started preparing well in advance
Market conditions can also affect buyer appetite and valuation. Factors such as sector growth, access to finance and competition between buyers may support stronger deal activity, but preparation and business performance are usually more important than trying to identify a perfect month to sell.
Ultimately, the best time to sell is when both you and the business are ready, and the company can demonstrate sustainable performance and future value to potential buyers.
Use our Exit Readiness Tool to assess how prepared your business is, or read our guide on when to sell your business for further guidance.
Do I need an adviser to sell my business?
You are not legally required to use an adviser to sell your business, but many owners appoint an experienced M&A adviser to help manage the process. An adviser can prepare the business for sale, identify and approach suitable buyers confidentially, coordinate negotiations and support the transaction through due diligence.
The right adviser can also help create competitive tension, protect your time and reduce the risk of avoidable mistakes. Read our guide to choosing the right business sale adviser to understand the different types of support available.
How do I prepare my business for sale?
Preparing a business for sale involves strengthening its financial performance, reducing risk and making sure it can operate successfully without heavy reliance on the owner. Buyers will also expect accurate financial records, clear contracts, organised documentation and evidence of future growth.
Preparation should ideally begin well before approaching the market, giving you time to address weaknesses that could affect value or delay the transaction. Use our Exit Readiness Tool to assess how prepared your business currently is.
How is confidentiality protected during a sale?
Confidentiality is protected through controlled information sharing, anonymised buyer approaches and non-disclosure agreements. Potential buyers usually receive limited information at the start of the process and must sign an NDA before commercially sensitive details are released.
Prospective buyers should be assessed before receiving further information, with documents shared gradually according to their level of interest and credibility. A well-managed process also allows the business owner to retain oversight of who is approached and what information is disclosed.
What documents do I need to sell my business?
The documents needed to sell a business commonly include financial accounts, management information, forecasts, customer and supplier contracts, employment records, tax information and evidence of intellectual property ownership.
Buyers may also request details of property, insurance, legal disputes, regulatory matters and company ownership. Organising this information before due diligence begins can reduce delays and help maintain buyer confidence. Our Business Sale Due Diligence Checklist explains the main information buyers are likely to request.
What’s the quickest way to sell a company?
Selling a business quickly is possible, but speed shouldn’t come at the expense of value or deal security Read more…
What’s the best way to sell a business online?
Yes, you absolutely can sell a business online. Many platforms specialise in connecting business sellers with buyers. Read more…
How can I increase the value of my business before selling?
You may be able to increase the value of your business by improving sustainable profits, developing recurring revenue and reducing reliance on individual customers or the owner. Buyers also value capable management teams, reliable financial reporting, scalable operations and clear opportunities for future growth.
The earlier you identify the factors affecting value, the more time you have to make meaningful improvements. Use our Business Valuation Calculator for an initial indication of value and our Exit Readiness Tool to identify areas that may need attention.