Sale now on? Key factors to consider when selling your business

Key takeaways

• An exit is a serious choice that involves several teams – and so needs to be communicated in advance.
• Market conditions may impact the value of your business, and can affect the timing of your sale.
• Working with experienced advisors can help business owners make an informed decision on whether or not it’s time to sell.

Selling any business, particularly one you’ve built from the ground up, is a lengthy process that requires careful consideration and thorough planning.

In addition to business considerations like market conditions and tax regulations there is also a human element to keep in mind – because it’s a decision that will impact peoples’ lives.

Here are a few key factors to consider as you prepare your business for an exit event.

To sell or not to sell: Navigating unfavourable market conditions

Market conditions have a direct impact on the perceived value of your business, and as a result on the timing of the sale.

If there’s an appetite to sell but conditions are not ideal, it may be time to reassess priorities and ask yourself:

There are options to consider if you feel that you might be better off delaying the sale. For example, you could consider shorter-term solutions like borrowing, or finding a minority investor to support the business until the market improves.

Communication is key: Understanding the impact on stakeholders

Wherever a business stands in its growth journey, a strong communication plan is crucial for announcing any change – particularly something as significant as a sale.

When preparing for an exit process, it is important to ensure all relevant stakeholders have clarity about the steps that are being taken, and what that could mean for the business.

Practical steps like drawing up a few talking points can help keep your team up to date and bring them along the exit journey. This level of transparency also helps the team stay focused, which is crucial for maximising your valuation. A sale cannot be a signal for staff to take the foot off the accelerator.

Next you need to inform stakeholders. Business owners may consider setting up trusts or passing some shares to their family, which may have tax implications and affect the deal itself. Again, it’s important to get your family on board and to explain how much time (and effort) the process will involve.

It’s also important to share the news carefully, particularly with other stakeholders, to prevent early disclosure. Few things spoil a sale than the news that it’s happening getting out ahead of time. Be sure to manage this sensitive information accordingly.

Once there’s a plan in place it’s time to prepare.

From preparation to acceleration: Using advisors to expedite business sales

You will need to invest a lot of your time as you prepare for a sale, because it may mean you need to reshape your business plan and financial model to create a compelling investment story.

Advisors can help you accelerate this preparation by tackling specific problem areas, such as tax or business structuring.

For example, if you are only selling part of your business you may need to spend time separating different entities. You may also need to refine the structure of the business you retain, while making sure the business you are going to sell is attractive to the market. On top of this, you also need to deliver clear, detailed communication explaining the sale to all relevant stakeholders.

Advisors will be able to highlight various options and evaluate potential contingencies that are tailored to your situation.

Monitor the market: Maintaining a global perspective

There are several environmental factors that can impact the market and dictate whether it’s desirable to sell your business or not.

For example, high interest rates or geopolitical events can lead to lower valuations and even drain liquidity, which directly impacts the timing of an exit. It’s also important to consider the valuation levels in the stock markets, the availability and cost of leverage, and overall confidence levels, all of which can play a positive or negative role in achieving a successful exit.

Again, there are options if market conditions aren’t ideal to sell. You could consider whether you are likely to be able to get a trade buyer, financial buyer or do an initial public offering (IPO) to sell stock shares to the public. These alternative paths can offer more flexibility during unexpected events like pandemics, global wars, and financial crises. Even more reason for business owners to keep tabs on economic and interest rate cycles which have a big impact on public markets.

Final takeaways

Deciding to sell a business is a complex decision, and there are several important factors to consider. From weighing up the personal drivers behind the sale to understanding the implications of exit on family and stakeholders, planning in advance and working with advisers is key to picking the right moment and maximise the value of the sale.