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Selling your business in the UK is often the climax of your business journey. When it’s time to move on or retire, you want to get as much value from your company as possible. It’s a significant decision to make and a challenging procedure, with many tax and legal considerations to consider. Here’s how to sell a business in the UK.
How to Sell a Business in the UK?
1. Prepare to Make a Sale
Prepare correctly before going to market, and your chances of closing a sale skyrocket (and at a reasonable price). When you enter the market too soon, you raise the reasons not to purchase and the danger of a costly transaction breakdown later on.
- Prepare up-to-date financial statements (sell at or soon after year-end)
- Clean up leases, contracts, and legal documents (a significant cause of due diligence problems)
- Resolve lawsuits and employee conflicts
- Increase cash flow to the bottom line (reduce personal expenses)
- Reduce owner reliance while increasing management responsibility.
- Consult with expert advisors to determine the optimal deal/tax structure (be sure to be prepared to claim entrepreneurs’ relief).
2. Following a Period of Deteriorating Profitability and Performance
It is the most challenging moment to be a company owner. Perhaps a drop in performance has sapped your enthusiasm and energy, and you don’t have enough petrol in the tank to rebuild the firm. Unfortunately, this is all too frequent among burned-out company owners. The problem is that a decrease in profitability and performance will also result in a decline in sales price.
If your company is at this point, you should consider if you can keep it going while increasing earnings and securing a higher selling price in the future. Maybe a new competitive threat means you won’t be able to recover.
3. Don’t Overfocus on Pre-sale Business Valuations
Pre-sale appraisals (especially for smaller enterprises) are sometimes a distraction, and they may skew seller price expectations vs market reality. Good planning and astute marketing drive and solidify value; focus on both.
4. Investigate the Tax You’ll Be Required to Pay
When you sell a firm in the United Kingdom and make a profit, if your capital gains exceed your tax-free limit, you must pay capital gains tax. However, several tax breaks may help reduce the cost:
- Firm asset disposal relief: if you’ve held the business for two years as a single trader or business partner, you might pay a reduced capital gains tax rate of 10%.
- Business asset rollover relief: postpone paying capital gains tax on assets sold if the proceeds are helpful to purchase new assets within three years.
- Incorporation relief: postpone paying capital gains tax when turning your business to a corporation by transferring your firm and its assets in exchange for shares.
- Gift hold-over relief: If you sell a company asset, you may delegate the duty for paying capital gains tax to the buyer.
5. Amid Consistent Performance Levels With Slight Profit Fluctuations
A company selling price may be based on the preceding three to five years’ average earnings in this instance since a prospective buyer can see that the firm has performed consistently over a long period. The key here is not to lull into a false sense of security. Once the ‘For Sale sign is up, it’s critical to keep the momentum going. The selling procedure may take some time. You don’t want to lose your selling price advantage because you believe the finish line is in sight and ease off on the gas pedal before it reaches.
6. Choose and Use the Appropriate Marketing Platforms
Finding a buyer is often a game of numbers. Put yourself in front of as many prospective buyers as possible. And strive for serendipity in timing between your availability and their search (+ finance capabilities).
7. Consider the Following Channels
- Websites for Selling a Business (google “how or where to sell a business”)
- People you are already acquainted with (competitor, customer, supplier)
- Market Research (Who is purchasing, advising, and commenting?)
- Market agitation (research potential buyers & send a copy of your profile)
- Social media platforms (Twitter, Facebook, Google+, and LinkedIn)
- Local Newspapers and Business Networks
- Google AdWords
8. Rising Performance and Climbing Profits
A growing company will always sell faster and for a higher price because intelligent investors have the poise to capitalize on future market success. However, few company owners prefer to sell while things are going well. They are delighted with the results of their labor and ready for it to continue. However, since purchasers would pay more for increased profits, a moment of growth is always an excellent opportunity to reflect on why you like owning and operating a firm.
9. Would You Be as Driven if Your Earnings Were Declining?
Profit and performance influence how your company is valued. Therefore, considering this is critical. Aside from profit and performance, there might be additional reasons you’re thinking about selling up.
10. When Is the Ideal Moment to Sell Your Business?
Retirement and illness are common reasons for selling a firm, but shifting to a new enterprise may also be on your schedule. Unfortunately, if health is a problem, you may not have a choice, but if you can time the sale well, it may make a significant difference in the ultimate value. Selling a corporation during its growth stage, for example, is likely to pique the attention of investors eager to benefit from increased earnings and performance. However, other factors may also have an impact on the time.
Conclusion
Selling your company may be both exhilarating and terrifying. It is often the conclusion of years of hard effort. Therefore, it is beneficial to learn as much as possible about the process. It helps you understand the fundamental concerns involved in selling a company in the UK, such as the numerous forms of sales and the tax consequences of each, as well as the complexities of various phases. After reading the preceding guide, is it a good time to sell a business in the UK?
