Non-Financial Elements to Selling a Business

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Non-Financial Elements to Selling a Business

When preparing to sell a business, a client will usually consult their accountant in the first instance about the various financial aspects of the process – including valuing the business and pulling together three-to-five years’ worth of trading accounts, profit and loss statements and cash flow figures, as well as mapping out the final agreement when an offer has been agreed.

But they may also need you to act in the role of a ‘critical friend’ to be available to consult on a variety of other more general issues relating to the sale that could help it proceed to a smooth conclusion.

Demonstrating the Strength of the Business Proposition

Buyers will likely not only be interested in the seller’s trading history but also its ongoing profitability. This means that in addition to the usual accounting records, it’s wise to encourage your client to gather together evidence of any customer contracts that show intent to continue to do business in the coming months and years. Even where no formal contract exists, simply showing proof of recurring revenues over a period of time will help to support projected sales figures. In the same way, it’s a good idea to demonstrate evidence of supplier relationships that underpin the business. This is especially important if the seller has any local, regional or national exclusives which could make the business more attractive to buyers and investors.

Staying on Top of Employment Protocols

If your client employs staff, they’ll need to consider how to handle any transition to respect employee rights throughout. Obviously, a good workforce is an asset to any business, so it’s in everyone’s interest to ensure staff are fully informed of any developments and are treated well. The buyer will be looking to see that legal procedures have been followed from recruitment through to the present day, so it’s worth spending time creating a pack that includes copies of company policies and procedures relating to employment. This should include each employee’s statement of employment (and/or contract) which will contain details of job title, description, hours of work, rate of pay and entitlement to holiday and sick pay, as well as pension contributions and notice period for termination of employment. A well-managed and orderly approach will impress serious buyers.

Taking Care of Business

A seller may hold leases connected to business premises, equipment, plant or vehicles. It’s important that they have access to sound advice regarding the terms of these agreements and that they can make them available for potential buyers as part of their due diligence process. Your client will also need to know if it’s possible to reassign leases upon reaching an agreement to sell – few buyers will want to acquire a car repair business, for example, without a garage to trade out of. When it comes to using premises and equipment, buyers will also want to see that all the relevant health and safety policies are in place and that they fully conform to industry legislation. If the business holds special licences – such as those required to dispose of hazardous substances, perhaps, these will also need to be evidenced.

Planning for the Future

Your client’s business will command more interest – and a better sale price – if buyers can see the potential for future growth. While producing a business plan when you’re aiming to sell up and move on may seem like a waste of time, it could be the best way to demonstrate that there are still plenty of opportunities to be explored. It’s sound practice to produce a document that details the history of the business to date, and that proposes specific strategies for extending or diversifying the operation in the future. Naturally, the buyer will want to perform their own due diligence, but an honest summary of trading performance with the addition of some ideas for developing sales or diversifying your offering will show your client’s business in its best light.

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