Five things at the top of every business buyer’s list

How to sell a business

If you’re planning to list your business for sale, you’ll no doubt already be gathering together the facts and figures that will form part of any buyer’s due diligence process. But while interested parties will certainly want to go through your financial statements, profit and loss sheets and cash flow forecasts with a fine-tooth comb, they’ll also want the information that demonstrates your business is well-run and conforms to all relevant legislation – as well as understanding that leases and contracts are in place to effect a smooth ownership transition further down the line.

1. Client contracts

While buyers will certainly be interested in your trading history, they’ll be more impressed if you have evidence of future profitability. In practice this means not only proving historical revenue streams but demonstrating that you have committed clients who are keen to continue putting trade your way. The best proof you can have is to have contracts in place with your main clients as it shows formal continued intent. If it’s not possible to tie clients to a contract, proof of recurring revenue over a period of months and years will at least show continuity.

2. Supplier relationships

In the same way, if you have supplier relationships that are key to your proposition, it’s vital to show buyers how strong these collaborations are – preferably via a contract. If you are the sole source for a particular product or service that’s in high demand, your asking price will reflect this level of exclusivity, so you’ll want to make sure you’ve ring-fenced this relationship and have proof to show to prospective buyers.

3. Staff matters

If you employ staff and value their contribution to the business, so will your prospective buyers. By law, employees should be given a written statement of employment within two months of joining a company – which can then form the basis for a contract. Information should include the employee’s job title and job description as well as the start date, details of pay and hours of work plus entitlement to holiday and sick pay. You should also include details of any pension contributions and a notice period for termination of employment, together with disciplinary and grievance procedures. The Employment Rights Act 1996 provides more advice.

4. Workplace essentials

If your business holds any leases relating to business premises, equipment, plant or vehicles, you’ll need to check carefully through the terms of your agreements and make them available for potential buyers as part of their due diligence process. Your buyer will need to know if any leases have to be reassigned – this is especially important if leasehold premises or major pieces of equipment form part of the sale agreement. Buyers will also want to see that you have health and safety policies in place that conform to industry legislation.

5. Business background

It’s a good idea to produce a document that details the history of the business and lists its trading position and commercial proposition. Although your buyer will want to perform their own background checks, an honest summary of your trading performance plus information about your place in the market and possibly including some ideas for developing sales or diversifying your offering will show your business in its best light.

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