12 April 2022

Four tips to consider when selling a business

By Tim Weymouth Dip CII Client Director

The conclusion of your business effort is frequently the sale of your company. When you’re ready to move on or retire, you’ll want to extract as much value as possible from your company. Selling a business is a complicated process involving a number of factors. Here are some tips to consider when selling your business:

1. Is there a market?

To sell anything there must be at least one willing buyer, so think about what your buyer could look like and how you want the transaction to be structured. Are you looking to sell and immediately retire or wanting a phased handover with you maintaining involvement? These two options could result in different buyers being attracted.

Research your competitors or perhaps the clients that you supply to. We have often seen clients of ours buy one of their key suppliers to maintain a supply chain. As with selling a home or car, timing is going to be everything with selling your business, so make sure you carefully choose your moment when to enter the market.

2. Communication is integral

Selling a business can be an unsettling time for everyone involved. The key is ensuring early and open dialogue between directors and staff, with perhaps the use of middle managers to hold smaller meetings at a local level.

Some aspects of the process will require confidentiality, but when the time comes, make sure the rest of the organisation hears it from you first and that you take the time to address any questions they may have.

At this point, you should be talking to your insurance broker and gaining their advice, just like you would be with your other professional advisers such as solicitors and accountants.

3. Get your books in order

Buyers will want detailed information on your financials and will also want to know details about your other assets such as human capital and plant/machinery etc. Be prepared to provide this and look to make it as easy as possible. The use of an online data room can be an advantage here.

If your insurance portfolio isn’t proficient, the buyer may be concerned about your risk management approach. If you can improve it by including Transaction Liability insurance, this could help you achieve a smoother exit and provide both parties with confidence in the seller’s warranties and indemnities.

You should also consider run-off cover for any claims made policies, management liability being the most pertinent. This contains a change of control clause, which will be triggered by most transactions. When you tell your insurance broker you are thinking of selling your business, they should raise these two points with you.

4. Consider how potential buyers will perceive your business

Ensure the valuation of your business is achievable within the current market conditions and there are willing buyers. Think about your business’s positive and negative features and look to maximise and reduce/remove respectively.

Be prepared for the negotiations that will follow. Take time to mentally prepare yourself for the process as you may have founded the business and, although it could be the perfect time to be selling your business, it will not be without emotion.

Key takeaway

When selling your business, follow these steps and obtain professional advice. Talk to your insurance broker or call Aston Lark on 020 7543 2800 for any insurance advice when selling your business.

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