If you’re a business owner, it’s likely that you’ve been integral to your company’s success, and your business has been at the heart of your life.
But now, you’ve started thinking it’s time to stop, sell your firm, and move on.
It may only have been a fleeting thought, or it could have been prompted by something more solid, like the approach of the age at which you’ve always planned to retire.
Regardless, if you’re thinking of selling your business, you need to put a plan together. Here are seven important reasons why.
1. A plan will help you check you’re making the right decision
Kicking off the process of putting a plan together will immediately help focus your mind on the task at hand.
Crucially, it’ll prompt you to start thinking of why you want to sell up.
As we’ve already stated, it’s likely you have very valid reasons. You might have simply had enough. You might have started to feel your age, or that you can’t take the business any further. Or, more pertinently, you might have felt ground down by the impact of the pandemic, which has been the trigger for you to call it a day.
Regardless of your motivations, it’s important to clarify your rationale for two good reasons:
- It’s likely potential buyers will want to know.
- Having thought about it, you might not think it’s a good enough reason to stop.
This is likely to be an emotional process. That’s why putting a plan together initially is so important, as sober decision-making is required.
2. A plan will secure your legacy
Having worked hard to develop and grow your business, you almost owe it to yourself to work equally hard when you come to sell it. The future success of your business will be your legacy, so you’ll want to do it properly.
Having a detailed plan in place can help secure that legacy. It can help ensure that, in the immediate future, the business is strong.
At the same time, a key part of the future success will depend on who you sell the business to. So, having a clear idea in your own mind of the values and principles you’d like potential buyers to have will be important.
3. A plan will tell you how much you need to sell for
You have confirmed that you do want to sell, and the sort of person or company you want to sell to. The next key issue that a plan will help you work out is how much you want to sell the business for.
No doubt you’ll have a figure in mind. You may even have had valuations and reports from expert analysts. However, what both of those methods won’t consider is how much you actually need to sell your business for.
Going through the process of putting a plan together will help you firm up what you need to live the lifestyle you want when you’ve sold.
4. A plan will help you define and realise your goals
Selling your business gives you a great chance to plan ahead. It’s a key milestone in your life, so why wouldn’t you take the chance on offer?
All the effort you’ve put into your business will have been for a specific purpose. Initially, the purpose was to grow the business, but now it’s to leave a legacy, and ensure you have enough to enjoy the comfortable and rewarding retirement you’ve worked for.
Knowing what you want to do in the future will feed into your planning process. Your life goals and aims will then form a key part of your wider retirement planning.
5. A plan can help identify what you need to do to get your business ready to sell
Part of the sale process will be making sure your business is in the best possible shape to sell. So, putting together a detailed plan will help you focus on what you need to do before the sale can proceed.
You should start by making sure all the paperwork and figures are in order. This is an essential part of a sale proceeding, and also ensures your plan is based on the most up-to-date business information.
Beyond that, you may need to have discussions with key employees and customers of the business, as well as suppliers and other third parties.
6. A plan will help you decide how you want to be involved in the business
Just because you’re selling your business, it doesn’t mean you can’t be involved in some capacity or other.
A new owner might want you to stay around, maybe for a transitional period. Alternatively, you might like the opportunity to stay on in a consultancy role – something that could facilitate a partial retirement scenario.
A third option may be leaving a family member in place, or someone you trust.
By planning ahead, you’ll know what sort of association you or your family would like with the business if you’re given the opportunity to specify.
7. A plan will help the financial process go smoothly
A key part of the sale process will be the finances. So, planning ahead will give you the best possible chance of getting the financial side of things straight and ensuring a successful sale.
For example, it’s likely you’ll have to pay Capital Gains Tax (CGT) on any profit you make on the sale. However, you may be able to make use of Business Asset Disposal Relief (BADR) to reduce a potential tax bill.
By planning ahead, you’ll be able to flag up any potential issues relating to CGT and your eligibility for BADR, plus any other allowances that could reduce the amount of tax due.
Business tax on sale of property can be complicated and difficult to understand. It’s always advisable to speak to a professional if you need help.
Get in touch
If you want to be able to make properly informed decisions when you’re thinking of selling your business, get in touch. Email firstname.lastname@example.org or call 01204 300010 to find out more about how we could help you.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.