GrowthBusiness.co.uk: Your gateway to entrepreneurial success

Taking the plunge and selling your business is a big step and one not to be taken lightly. David Robertson of Bibby Financial Services shares his advice on avoiding the pitfalls and securing the best possible outcome

Most successful businesses will attract interest at some point from investors or competitors, who are keen to grab a slice of the action for themselves. Buying a business is a lucrative option for entrepreneurs as they get an established name, an existing customer database and an immediate revenue stream. But an acquisition is not without its challenges, especially in the current business landscape, for the buyer and the seller and the process can be costly, time-consuming and complex.

There are countless reasons why a business might be put up for sale, from an offer that simply can’t be refused through to retirement. There are different ways to sell all or part of a business, such as disposing of the whole company as a going concern, or retaining partial ownership and continuing to run the business on a day-to-day basis.

Many businesses are sold in a trade sale to another business; others are sold to private equity buyers, while some companies are bought by their existing management team (MBO), or an outside management team (MBI). Whatever the method used, there are advantages and disadvantages. An MBO team has in-depth knowledge of the business, a firm grasp of its value and is best placed to act quickly while a trade buyer can benefit from economies of scale such as, for example, purchasing power to get better deals from suppliers or spreading administrative overheads over a bigger operation.

Regardless of how a business is bought or sold, there are a number of top tips to ensure the whole process goes smoothly and everyone involved benefits.

It’s all in the planning

Prepare for the sale as far in advance as possible to get everything in order and make any necessary final preparations before handing the reins over. Good forward planning will help maximise the value from a sale.

Time is of the essence

Selling a business at the right time can have a huge influence on its value. During these turbulent economic times, it is harder to sell a business and would-be buyers have less cash available to spend. Waiting until the sector is performing strongly will ensure a better sale price.

Out with the old in with the new

How much time is the current owner prepared to give to the new owner? Are they prepared to continue working for the business after the sale? Deciding how much or how little time can be committed is vital and should be made clear to potential buyers at the outset.

Be guided by experts

Experienced advisers are essential for an effective sale and the right one can have a huge impact on its success or otherwise. A combination of specialists will provide optimum support.

Firm up finances

Ensure your finances are in good shape by exercising tight credit management and effective stock control practices. Make realistic provisions for bad debts and account for any irregularities

Be ready for take off

Ensure key elements of the business are in order to show it in the best possible light. Good sales forecasts will help to increase prospective buyers’ confidence, but must be realistic and supported by evidence

Maximise profits

Boost short-term profits by reducing longer-term investments such as avoiding heavy advertising spend or taking on new staff. However, avoid excessive cost-cutting or the business may suffer as well as the price potential buyers are prepared to offer

Size up offers

Carefully play off prospective buyers against each other to promote higher bids. Be prepared to negotiate and trust business instincts, if a deal does not feel right, keep looking

Selling a business in these tough economic times is particularly difficult. Getting ready for sale is often the culmination of many years of hard work and perseverance – being too hasty or getting it wrong can waste years of concerted effort. It is often an emotional, bittersweet experience for business owners. By keeping an eye on the prize and ensuring the business is in tip-top shape for would-be buyers, owners can secure the right deal at the right time and at the best possible price.

This story is from Growth Company Investor, the independent voice on fast-growing companies. Subscribe today for the latest AIM recommendations.