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Getting set to sell your business

By Nicola Lucas, Associate at law firm Nockolds

For many entrepreneurs selling their business is the culmination of a long-term exit strategy. Before the sale takes place, or even before a buyer is found, there are a few things that can be done to contribute to a relatively quick and painless sale. Most of the common mistakes we see when advising on sales and acquisitions can be avoided with a little forward planning. Here we set out some helpful pointers:

Conduct a 360 review of your business

Put yourself in the buyer’s shoes. When looking at a company, they will want to know what they are getting for their money. Get your financial records and accounts up to date to ensure you have information ready when it is asked for. Are there any concerning gaps or anomalies that need to be addressed? If so, do it now, before a buyer is found. 

Maintain tight credit control

Who are your debtors? Do you chase them regularly? How does it impact on your business? A buyer will want to know that you have your credit situation under control. It also helps keep the company’s cashflow healthy and reduces any risk that invoices will not be paid.

Identify professional advisors

A good team ethos between you, your solicitor and your accountant will help the transaction proceed smoothly. There is no point having a solicitor or accountant appointed if you don’t feel you can ask questions, or if they don’t explain things clearly to you. Similarly, start communicating with your accountant about your intentions; they are best placed to advise you from a tax perspective what structure suits you best. They can also advise you on the price you should be accepting and what your company is worth.

Take ownership of IP

The default position is that intellectual property, such as branding, logos etc, is owned by the designer, not the commissioner of the work. The most famous example of this is when Innocent Drinks discovered it did not own its iconic logo, leading to costly legal action.

Whether a business owns its IP often only comes to light when a potential acquirer is conducting due diligence. The valuation of the business can be harmed by non-ownership of IP, as acquiring the IP once it has become iconic can be expensive. Designers are normally quite relaxed about assigning ownership of IP to the commissioner of the work at the outset when it has little value. This can be achieved by checking the designer’s terms and conditions, and asking for an assignment if ownership is not assigned to the commissioner.

Put in place supplier agreements

Informal contractual arrangements are something we occasionally see and should be formalised prior to any sale process. Without them, a buyer may have to consider if this leaves them at risk in any way, and what work needs to be done after the deal is concluded. Ensuring supplier contracts are in place will reassure potential buyers that the business is run professionally.

Do it on your terms

Do you want to retire without any future involvement? Would you be willing to be a consultant after the sale goes through? How are you going to be paid? What are the buyers actually getting? What exactly are you selling? Start writing a list of what is important to you so you know your objectives, goal and important elements of the deal from the beginning.