We always recommend the book 'A quick Reference guide to selling your business” by Ken Gorman, which covers all the key aspects to selling your business, is written by a respected broker, and has a UK focus.

Rightly so, this is the first question everyone asks. While the only reliable answer is “it's worth what someone's prepared to pay for it” there are general market averages to consider. In SMEs, on average a business will be worth between 2 and 4 times the EBITDA. (E.g. If you make £200K per year in EBITDA it's worth £400K - £800K) To give some context, a business that's highly dependent on the owner, which has older equipment, not much documentation in place and high customer churn will represent a higher risk to the buyer, so will command a lower multiple. A company with a management team in place to run the business after the sale, with modern equipment and established long-term customer relationships and or reoccurring revenue will be a safer bet and therefore carry a higher valuation. The larger the revenue (£5M+) the higher the multiple too. There are many factors which affect valuations, and there are also several ways of reaching a valuation. If in doubt, reach out to market experts. (Just be careful of brokers who give a unrealistic sky-high valuation, but want an upfront “listing fee” to begin. The most widely accepted rule of thumb is to use a multiplier of the profits of the company)

Much like preparing the sale of a house, it's best to ensure all documentation is in order. While your years of experience give you a good “gut feel” for customers and staff, a buyer will likely want written contracts and assurances to back up what you're telling them. Most buyers won't want to run every aspect of the day-to-day operations of the business. Think about which existing staff members can learn parts of your job, to enable you to gradually step away from the coalface. This gives buyers confidence the business won't crumble once you're gone. Get your books in order. Nothing kills buyer confidence more than when numbers don't stack up, or when they're found to be different to the initial conversations after due diligence begins. These things take time, so the earlier you can plan, the better.

There are many ways to reach an agreement. Commonly, a buyer will have a % stake of their own cash and will borrow the rest of the money to achieve the value agreed in their offer. While sellers want to receive all of the money on the day of completion, buyers will look to pay a percentage of the total value on completion, with the balance being paid over an agreed period. This deferred payment is made from the profits of the business, so gives buyers more confidence that the seller believes the company will remain profitable after their departure. There will be very few buyers who pay 100% of their own cash on day one, in most cases they will look to raise finance against the assets of the business (plant & machinery, property, debtor book etc..) Bear in mind that businesses with lower assets or a larger risk profile will likely need a higher degree of deferred payments or even an “earn-out” to get a deal done. There *may* be someone out there who will pay all in cash on day one, but how long will it take to test out this theory, and given their liquidity, how many other options do they have?

There are pros and cons to each, and ultimately it depends on you. Specialist brokers help advertise your business and have access to networks of people who may be interested in your company, however the fees can run into tens of thousands and once you've paid their upfront fees, you're exclusively tied to them until the business sells (or you are forced to give up…) Sadly over 80% of businesses listed never sell, leaving owners stuck with no option but to close their doors. Private buyers tend to have a firm acquisition criteria so can act quickly. There will be no listing fees involved, but consider that a private sale has no one to “broker” the deal and keep everyone working together.

If we aren't a good match, and you still wish to pursue selling your business, we have a network of other individuals and contacts with brokers that we'll happily introduce you to.

The depth of the Due Diligence process depends on the buyer, and the complexity of your business. The buyer's legal people have a range of “checks” to carry out on the business such as checking you're the legal owner, ensuring employee contracts are in place, looking at leasehold agreements to make sure the company won't get evicted any time soon and many other items. It can feel like an inquisition, but the buyer isn't looking to catch anyone out, they just need to be sure of the foundations of the business. There will also be audits carried out on the finances and tax returns to ensure the books are correct. You won't be expected to know the answer to every aspect, work with your lawyer and accountant. If there are issues you know about, highlight them early rather than waiting for them to be found. There's a way around most things if both parties work together.

To ensure there's a smooth transition between owners, typically, the exiting owner will be asked to stay behind after the sale to handover and provide consultancy to the new owner. The length and type of work expectations can vary per agreement, but generally, it will range from 3 to 6 months while the new people find their feet. Sometimes if a bank is financing the deal, they'll like to see a longer post-sale consultancy to minimise any risk.

We're not interested in wasting your time (and ours) with embarrassing low offers with the hope of exploiting the current global situation. We are interested in having honest, open conversations and ultimately paying a fair price for a great business. Every transaction is different, but this is how we typically work: 1 - Get in touch - send us an email, set up a Zoom meeting or give us a call on + 44 (0)20 3290 3037. 2 - Intr oductory meeting. We're always available to chat confidentially about your situation. (We're happy to shoot over an NDA at a moment's notice.) On our first call we'll talk at a high level about your business and your goals. There's obviously no pressure to take things further. 3 - Explore further. Based off our initial call, we'll schedule a meeting to talk face - to - face . We're happy to come to you to take a look at your business if you're comfortable (otherwise we're happy to keep talking virtually) and we'll aim to quickly come to a ballpark valuation. At this stage, if we're both still keen to keep things moving we'll sign a Letter of Intent which allows us to confidentially look closer at the key details of your business. 4 - Agree on terms. Once we've spent some time looking into the business in detail we'll be in a position to agree on the final terms. Our goal here is to arrive at terms and a price everyone feels good about. 5 – Due Diligence. We'll both need to assign our legal teams to support leg al and financial due diligence. This can be a strenuous task, so we'll schedule weekly calls to keep things moving along and provide a good opportunity to discuss any matters that arise. 6 - Close. Now, we just need to draft the documents, close the deal and transfer funds. You'll be able to see a post - investment plan so you can be comfortable with what happens next.