Selling a business - your questions answered
At X5 we can advise on business exit strategies. Here are some frequently asked questions about selling a business...
We are often engaged to help clients dispose of their business. Here are some of the more frequent questions we are asked:
Q. When is the best time to sell my business?
A. This depends on a number of factors - both external and internal. Externally it will depend largely on the state of the market. If possible, sell when the market is strong and aim to complete the sale well before any anticipated downturn.
Internally it depends in part on the strength of your performance. Though it might be tempting to consider selling when things are tough, you will command the best price if you sell when you are approaching the peak of a pricing cycle.
Above all, if you have any choice in the matter, sell when you want to, not when you have to.
Q. How can I tell what is my business worth?
A. Although there are various quantitative valuation techniques, this tends to be a rather inexact science. The value of business can be subject to considerable variation in a moving market. Ultimately, a business is worth what a prospective buyer is prepared to pay for it.
Q. How do I set my asking price?
A. Where possible, you can let buyers set the price through competitive bidding. Most will bid within a predictable range, but it is not unreasonable to expect one or two to bid substantially higher.
Two common mistakes sellers make are to set an asking price that is too low and thereby preclude any premium bids, or to build in so much leeway that they set the price unrealistically high and deter serious potential buyers.
Q. Where am I most likely to find a buyer?
A. Though owners often assume they already know the most likely buyers, it is surprising how many times the eventual buyer appears from a completely unexpected quarter.
If you want the best deal you may have to be proactive in finding a buyer. A potential buyer might not even be actively looking for an acquisition at this stage, but might become interested if you approach them in the right way.
It pays to research your suppliers, competitors, and customers. Look for situations where your business will add strategic value such as extending their customer base or bringing much needed technology or expertise to their operation.
Q. How can I make the most of the funds from the sale?
A. Once you know the value of the business you need to discover how the funds released by the sale can best be invested to provide you with a comfortable retirement or used to begin a new business venture. Valuable tax reliefs are at stake here, so consult us early in your planning to avoid an unnecessary tax bill.
When it comes to selling a business the service of an experienced and trusted intermediary is crucial if you are going to obtain maximum leverage from the opportunity.
If you are looking for professional advice on business exit planning, including selling a business, contact X5.