How to sell your business

If you're thinking of selling your business, you may need some advice. That's why we've put this guide together, displaying all the steps required to market your business.

January 2022.9min read time

What will this article include?

  • Preparing for the sale

  • Research into your market

  • How much is my business worth?

  • Finding a buyer

  • Talking with buyers

  • Agreeing on a price

  • Finalising the sale

  • FAQ

In the last 20 years, the number of business owners has increased by 2.5 million.

With the increasing trend of being your own boss, it’s now no secret running a business requires a tremendous amount of time and effort.

If you feel it’s time to move on for whatever reason, then we’ve created a guide to help you get your business sold for the best possible price.

Preparing for the sale

Before we begin, it’s essential to make sure the business is ready to be sold.

Here are a few things to consider in your preparation before talking to buyers:

  • Make sure your premise is ready for viewing

  • Ensure staff are capable of continuing their duties when the new owner takes over

  • Review contracts with suppliers, employees and any clients

  • Prepare a team of accountants and lawyers to help finalise the sale

Depending on your business, there may be more preparations.

Research into your market

It is vital for you to research your respective market and increase your chances of a successful sale.

Providing research to buyers will help them form a business plan early on, giving them more confidence to acquire your business.

Around 70%-80% of business owners fail in selling their business without sufficient research.

When is the best time to sell my business?

The timing of a sale will play a factor in the process length and cost.

Selling during a busy period may be more time-consuming. Booking viewings and appointments may become difficult to balance with handling customers.

The benefits of selling during a profitable season will give you more to talk about with buyers. It will also increase sales opportunities as there is more exposure.

More on this can be found in the advertising section below.

Demand and Competition

A crucial factor to review is the demand for businesses in your sector.

Businesses in low demand generally take more time to sell.

As well as demand, every business faces competition. So it will be important to address these points in order to appeal to buyers:

  • Do you have a loyal, consistent consumer base?

  • What is your business share of the market?

  • Is there room to grow the business?

  • What makes your brand unique? For example, a USP

  • Your marketing strategy

business-worth-image

How much is my business worth?

To find your business worth, you will need a valuation. It is best to think of a business valuation as a house valuation. Some of the things your valuation will factor in are:

  • Value of assets

  • Turnover

  • Business location

  • Potential for growth

  • External factors such as the economic situation

Based on your annual profit, buyer's will make you an offer that they can make a return on investment on. This is refered to as the price to earnings ratio.

If you are a limited company, you will need to review whether you are conducting an asset sale or a share sale. There is a significant difference between the two methods, in particular the tax paid and what the buyer will be acquiring.

As there are many valuation methods, we recommend seeking advice from an industry expert to ensure you receive the most accurate sell price.

You can obtain same-day assistance by requesting a business valuation through Rightbiz on the following page:

Request a business valuation

For more information on business valuations, click here.

Finding a buyer

Once you have your valuation and everything is prepared, it’s time to find a buyer. Firstly, you will have to decide if you would like to sell confidentially. This is because selling a business can worry many people involved, such as staff or partners.

If you decide to make the sale public, there will be more advertising avenues. The most popular advertising methods are available whether the sale is confidential or public.

Online Advertising

The days of selling a business only to friends or family are behind us. As we’re connected more than ever over the internet, the possibility of finding someone willing to travel from afar is very much real.

You should consider these advertising methods to achieve the most reach and awareness:

  • Business for Sale websites

  • Social Media (Facebook, Twitter, Linkedin)

  • Google Ads

  • Business Networking

Business for sale websites is the most effective advertising method as they attract buyers from all over the country and utilise many forms of marketing on your behalf to help.

On top of submitting your advert on a business for sale marketplace, you may also want to advertise across social media platforms, which are particularly good for letting your friends, family, and locals stay in the loop.

Sale Brochures

Sale Brochures are a great way to make locals aware that you wish to sell the business. A well-written brochure can be the difference during the process.

It is important to be informative and talk about how lucrative this opportunity can be for a new ambitious owner. We recommend that you include the following details:

  • What your business does

  • An approximate location

  • What you have to offer over competitors (customers, brand, gap in the market)

  • Reason for sale

  • Potential for growth with a new owner

Sale Boards

Sales boards are commonly used for houses, but they are a helpful tool for selling your business.

A sales board is used to show buyers that you are a committed and motivated seller and may catch the eye of a passerby.

Kremersigns, Harrisonsigns and Perfectsigns are some businesses that sell sales boards.

Talking with buyers

During the business for the sale process, you will deal with people of various backgrounds and experiences. You may have to help the buyer understand the business model or justify your asking price.

What is the buyer’s due diligence?

Once the buyer has received enough information, they will analyse the information they have gathered and then decide what’s best for them.

Approximately 50% of sales do not fall through during the due diligence phase!

Making buyers uncomfortable is the last thing we want. So it’s essential to reply to messages as soon as possible.

Transparency in conversation is important. Make a good impression, and the buyer will see your business as a great opportunity.

talking-with-buyers-image

Agreeing on a price

What is the key to a successful business sale?

Put simply: Flexibility

Don't quickly dismiss an offer based on instinct. Businesses usually sell for 70%-80% of the valuation.

You should be as transparent and honest as possible to ensure all negotiations go well.

If the buyer can secure a loan, the process will be much smoother.

Remember to keep your options open during negotiation. Before trying to finalise a sale, ensure you’ve considered every interested buyer.

Businesses are not commodities; neither buyer nor seller should rush to a decision.

If the agreement does fall short, see if there is enough space to work out a solution with the buyer.

It’s essential to understand the reasoning behind a buyer’s asking price. Again, flexibility is key.

If you sell your business through a broker, they may be able to sell closer to the initial asking price with their expertise. We’ll cover more on that further below.

Click here to view our article looking at how to negotiate the sale of your business, and some useful tips you can use during the negotiation stage.

Finalising the Sale

We’re almost at the end of your business sale. Now all that’s left is to ensure everything is in place so you can finalise the deal.

Here are a few of the people that are usually involved in finalising a sale: 

  • Accountants

  • Solicitors

  • Employees

  • Banks

  • Contractors

It’s also good to check in with the buyer and check up on the status of their side of the sale. Work with the buyer to get the deal done fast.

You may be too busy to sell your business, or you may require more preparation than you expected. Here’s a solution!

Sell your business with a broker. A broker’s role is to assist you in more time-consuming parts of the process.

For a medium or large business, brokers help save time and offer the skillset required to close large deals.

With a broker’s vast experience and industry knowledge, they’ll be able to:

  • Advertise your business for you 

  • Negotiate a better price

  • Save a lot of time

  • Access to broader markets

  • Attract genuine buyers

Brokers will charge a commission fee, around 5%-10% of the final sell price.

If this sounds like an option right for you, then you can arrange a call with one of our trusted UK brokers on the following page:

Sell with a business broker

Alternatively, you can continue selling privately now that you know the steps required in the process.

It may be favourable to handle the process yourself and save potentially thousands of £, as most online business marketplaces do not take a commission. 

Do you pay taxes on selling a business?

Profit made from the business sale will be taxed. This is known as Capital Gains tax. 

Capital gains tax is the amount you must pay when selling an asset that has increased in value over time.

Your accountant will be aware of this and take this into account when offering help and advice.

For more information, please follow the link below:

Learn more about capital gains tax

Is selling the only option as an exit?

There are various strategies available when looking to exit your business. First, converse with your accountant and discuss your current situation and goals with the best-suited options.

FAQ

What is Due Diligence, and why is it so important?

Due diligence is a process in which buyers will analyse the information they have gathered regarding your business and use this to make a final decision on whether they’d like to buy your business or not.

What is the total cost when selling a business?

Here is a quick summary of the expenditure when selling your business:

  • Legal Services

  • Getting a Valuation

  • Advertising Services

  • Capital gains tax(tax when selling your business).

  • Broker fee(Fees brokers charge, usually 5-10%)

The total cost incurred will depend on how much advertising was done and your business’s size.

How long does it take to sell a business?

An average business sale will take anywhere between 6 and 12 months. Sellers can do a few things to speed up this process, such as advertising strategy, sell price, and demand in your sector.

Will my business sell?

The success of your business sale will depend on:

  • Timing of the sale: Performance of the business

  • Asking price of the business

  • Demand for businesses in your sector

  • Buyers that you attract through advertising

How do I reach as many buyers as possible?

The key to reaching as many buyers as possible is to continue doing what you’ve always been doing: marketing your business.

In order to reach as many buyers as possible, explore many marketing methods. You may want to use the strategies mentioned before. 

A combination of online and real-life marketing will maximise your chances of a sale.