Time to sell

JR Watson

1st October 2018

Buying & Selling A Business

JR Watson

By Sue Leathem

JR Watson & Co

YOU have decided to sell your business, and move on to new pastures, another business, retirement or paid employment. This needs planning, it cannot happen overnight. The timing will be influenced by market conditions, the availability of credit and how you market the business.

Your starting point is years before you want to sell. Businesses that sell for the best prices are strong. The business owner has good management support around him or her, a clear business strategy and an identifiable brand. The business operates with a clear ethos and all staff know what is expected of them. Once you get to this stage, you might be having so much fun that you change your mind!

If you are happy to pay capital gains tax at the 10 per cent rate for Entrepreneurs relief, plan to make sure that this rate will apply and is not sullied by non-business assets in the business.

Make sure you know what you are selling. This is quite easy if you are selling a company, it will be the shares. If you are unincorporated and own the property, is this included in the sale?

The next stage is to find a buyer, easier said than done.

If you have a child working in the business who wants to take it on, your easiest route might be to work out a deal whereby the business buys back some of your shares for cash, and you gift shares to the child. The deal needs to be carefully structured to ensure the best result for tax purposes. This can be a very successful route but is only appropriate in a small number of situations.

What about your management team? Do they want to take the business on? Management buyouts do work, but not in every business. The phrase management buyout sounds grandiose and they have been used for substantial businesses these deals involve complicated tax planning and legal documentation. However, selling your small business to an enthusiastic employee can work in the same way.

There might be a local competitor who would be interested. A practical difficulty is finding out whether they are interested without disclosing your identity. Use an accountant or solicitor to make enquiries of businesses with a suitable match to preserve your anonymity. There is a risk that tittle tattle has an adverse effect on the value.

If none of these options fit, there are a number of business agents that match sellers and buyers. Some deal with small businesses, such as shops and salons, others with large businesses and some have particular specialisms. Take your time to find one. Talk to them about what they do, how they do it and why do they think they can find your buyer? When you have appointed an agent, you have to be patient and let them get on with it.

You should ensure that your solicitor and accountant are involved at all stages. Being advised that a sale has been agreed does not usually give sufficient time to ensure that appropriate structures are in place and lack of planning can be expensive.

Sue Leathem is a Partner in J R Watson & Co & can be contacted on 01604 630745 or by email to sue.leathem@jrwatson.co.uk

JR Watson