Getting your finances in order when planning for a business sale

Introduction

Many business owners are planning for their retirement. You may want to sell your business, or perhaps start another company. Either way, you need to be aware of the tax implications and consider how best to structure your finances before selling a business.

Have a plan for your business assets

When you put your business up for sale, one of the first things that will happen is that a prospective buyer will ask to review your assets. This can be a little intimidating, but it’s important that you have a plan for what you’re going to do with these assets before you get into this conversation. It’s helpful if you’ve thought this through beforehand so that when someone asks how much your business assets are worth, or what they’re going to do with them after the sale, it doesn’t catch you off guard.

What are some of the valuable things inside my company?

My computer network and server data center
New furniture I just bought last year (still under warranty)
All my company’s equipment and machinery

Consider restructuring and transferring assets

Transferring assets to a limited company
Transferring assets to an employee share scheme
Transferring assets to a trust
Transfering assets to a family member

Put your finances in order

Once you have a clear picture of your finances, it’s much easier to understand what your business is worth. The next step is to know exactly what you owe and how much money is in each one of your bank accounts. Once you’ve done this, then you can start figuring out what kind of cash flow (the amount of money coming in) that you need for various expenses in order for the business to run smoothly.

Ensure you can meet tax obligations

The last thing you want to do is leave the taxman (and other government agencies) out of pocket. So make sure that you are up-to-date with your payments and any tax reliefs you are entitled to, such as R&D tax credits or capital allowances. You might also need professional advice on what insurance arrangements are best suited to your business—for example, whether it would be beneficial for a company car or mobile phone cost to be included in the sale price.

Plan for pensions and retirement

If you’re planning to sell your business, it’s important to plan for the future. You should consult with a financial advisor and consider your options. You need to plan for both the expected and unexpected events that may occur in the future, like retirement and pensions.

Plan the sale of the business

After you’ve spent time planning the sale of your business, it’s time to get started. Here are some tips for selling a business:

Finding a buyer. A good first step when selling a business is finding potential buyers. You can do this by posting an ad online or asking friends and family if they know anyone who might be interested in purchasing the company. If you’re looking for investors, reach out to angel investors or venture capitalists (VCs). VCs will want to see that a professional valuation firm has performed an evaluation of your company—so don’t worry if you don’t have one yet! You should expect them to ask questions like, “How much money do we make per year?” or “How many customers do we serve?”

Planning the exit from a business is crucial to ensure you maximise your financial reward.

Planning the exit from a business is crucial to ensure you maximise your financial reward. The sale of a business is often one of the biggest transactions in an individual’s life, and planning for it should not be treated lightly.

The exit process is complex and important – it can take many years for an owner-operator to reach this point in their enterprise, so it’s worth thinking ahead about how you will manage this milestone. Planning will help you make sure that everything goes as smoothly as possible, giving yourself time to think through potential issues rather than scrambling at the last minute to resolve them.

Conclusion

The sale of your business is a major milestone, and it’s important that you prepare yourself financially. If you are planning a sale, then it is essential that you take steps to ensure that you maximise your financial reward. The key areas to consider include: