There comes a time in an independent trader’s life when they might want to retire. Mike Owen talks you through how to do it without losing out.
The time comes in every relationship… The reasons are as many and varied as imaginable; from wanting to be with children who have emigrated, onset of reality about age or just falling out of love with your business. The time comes when you want to sell-up. The decision now taken the process, unlike selling a house, can become quite protracted.
Transaction of a business calls for a considerable amount of planning, of setting out a strategy, so that you have a business to sell. You must consider the effect of the news that you are ‘going on the market’ will have on staff and customers alike; handled incorrectly this can stampede the herd – equally your competitors will also start looking at your business like vultures circling over road-kill. Please do not be surprised, the news will get out there and this will happen; plan for it.
Obviously it is impossible to cover all bases when dealing with hypothetical cases in a magazine, as a result only generalities can be considered. The sale of a business can become clouded by such things as its legal status – a company (ltd), a partnership, a sole trader and whether the property is owned or rented – and these are just to start with.
Confidentiality during the planning stage will be the key and, once the decision is taken to sell, your strategy of business management has to change. The first fact you must face when you go to sell your company is that, if financial pressures allow and to achieve the best results, it will take quite a while. Why? Because effective operation of a business is different than that used for selling a business and the value of that business is evidence based – it’s about your company’s records.
Rich lawyers
Somewhere in amongst this transaction you are going to make a lawyer rich, accept this and start now by asking them to draw up a ‘deed of confidentiality’ a document that is legally enforceable should an interested purchaser start talking around the industry; ensure that it is in place, signed and sealed, before your business name or commercial details are disclosed.
About now you arrive at a fork in the road – to tell or not to tell the staff. Should the possibility of an MBO (Management Buy-Out) not be on the cards I would advise you keep your own council. If you are selling the business, they will remain employed by the new owner of the same company – their rights (should) remain intact.
If you do not have a prospective purchaser in mind there are several specialist garage industry agents, and I would suggest retaining one of these to take you to market; they are versed in business transaction and extremely discreet. In retaining an agent there is no value in trying to get them to work for nothing – they have a living to earn as well. If you nail their feet to the floor on fees they will simply push clients towards more lucrative businesses (for them).
Hopefully now, with a fish on the hook, your purchaser will want to know the inner workings of your business, this is called ‘due diligence’ and is particularly onerous if your purchaser is using a lending institution as they want to be sure their investment is safe. Often this takes place on site and will involve an accountant or similar spending several days ensuring that your business records are accurate and not a work of fiction – you, or your accountant, will be expected to be involved.
Excahnge and Completion
As with transacting a house you will have an exchange and completion date – before signing anything you need an undertaking that complete funding is available; this is where transacting a business differs. Once the business is transferred you, for a moment in time become a creditor to your business, now owned by somebody else, their payment releases you as a creditor. Should they fail to discharge the debt, they now own the business and you have become an unsecured creditor – you cannot ask for the business back – be careful, there are many instances of these payments being protracted, due to last minute shortfall of funds, even resulting in reduction in the business value.
Insist that your solicitor does not take you into any form of business transfer until the funding is held in ESCROW – where the money, in total, is held by a third party as an intermediary between buyer and seller.
It is an impossibility to cover all aspects of business transaction in a few hundred words – books are written about it. Even now after transacting several businesses I would turn to my preferred professional guys to ensure my back was covered – I suggest that any vendor does the same.
Now safely transacted, the money earning to two-tenths of not-a-lot on deposit (don’t get me on the subject of bankers) all there is left for you to do is reach for your pipe and slippers…
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