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A guide on how to sell a business

5-minute read

Business owners selling a business.
Sam Bromley

Sam Bromley

6 October 2022

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Selling a business comes with legal and financial implications, from taxes to telling your staff. If you’re set on your decision, here’s how to sell a business.

  • How to go self-employed

Getting ready to sell a business

If running a business involves both planning and marketing, selling one does too.

Proper planning can help you attract buyers, so it’s important not to rush the decision. To make your business as appealing as possible, you might want to:

  • bring your accounts up to date
  • settle any disputes (whether it’s with employees, clients, or customers)
  • put more profit into the business
  • take a look at whether any contracts and leases need to be resolved
  • make sure your paperwork and records are in order

Spending time on planning should help you get to grips with your business’s proposition for potential buyers. What makes it appealing? It could be:

  • increasing customers, sales, and profits – or even just a stable income
  • an existing long-term contract for products or services
  • clear potential for growth

You can incorporate those into a proposal for buyers, focusing on your business’s USPs and your reasons for selling.

Why do you want to sell your business?

It’s important to be clear about why you're selling – potential buyers will want to know.

Whether it’s time for a new challenge or you’re struggling to find new customers, your ‘why’ helps you shape your goals.

For example, how much money do you need to do what you want to do next?

How long does it take to sell a business?

A deal can take six to nine months. Factoring in your preparations, the process may take more than a year.

Timing the sale is important, because you’ll want your business to be in the best possible position. If you need to make improvements, then account for them in your timeline.

Business brokers offer specialist services when it comes to buying and selling businesses.

You may not need to use one if you’re selling to a family member or someone else you trust. But brokers might make sense in some situations – for example if you want to negotiate the best price, or you don’t have enough time to do everything yourself.

On the other hand, selling yourself avoids broker fees. It all depends on your needs.

How to value a business for sale

Selling means that you need to know how much your business is worth. There are different methods you can use to value a business.

It’s possible to reach a figure yourself, but professionals can also give you an independent valuation.

A valuation before you start the process can help you understand whether your business is in a good enough position for you to reach your goals. If it’s not, then you can focus on improving.

Finding a buyer for your business

As mentioned earlier, you can approach this step as if you’re marketing your business:

Create a sale brochure – whereas a business plan helps you attract funding when starting up, a sale brochure should appeal to buyers. Detail your business’s USPs, growth potential, customer base, and other positives.

Approach buyers – do you have any potential buyers in your network, like clients, customers, or suppliers? You could also try to find potential buyers on social media. Otherwise a business broker can take control for you, as mentioned above.

Choose a few prospective buyers – sometimes, deals don’t work out. It’s useful to have another buyer you’d like to work with when that happens.

Negotiate – buyers will want to negotiate the sale price, so make sure you’re prepared. Your set price should leave room for movement, but have a minimum price in mind. If negotiations get difficult, focus on your business’s positives – how does its USPs and customer base match your buyer’s goals? Check your potential buyer has the financials sorted too, otherwise the process will take longer.

Keep everything in writing – from your initial approach to negotiations, a record of agreements made can help resolve any disputes that arise. If you make a phone call, then follow up with an email to make sure everyone is on the same page.

Due diligence – when someone agrees to buy your business, they’ll want to make sure that the deal checks out. If you’ve prepared, this shouldn’t be a problem, but working with a professional can help you spot (and plug) and gaps. The buyer will be looking at things like your intellectual property, contracts, financial documents, and business insurance.

Making the sale

Because of the legal complexity involved with selling a business, you may want to pay for professional legal services.

A solicitor can look at the agreements and make sure there are no errors. Documents include:

  • purchase and sale agreements that cover the terms of the sale
  • lender documents, if the buyer is borrowing money for the purchase
  • lease agreements that need to be assigned to the buyer if office space or equipment is being rented, for example
  • bill of sale, which transfers business assets to the buyer
  • non-compete agreement, which your buyer may want you to sign to say that you won’t start a competing enterprise

Tax when selling a business

Once a deal’s agreed, there are different final steps depending on your legal structure. They usually involve telling your staff, notifying HMRC, and organising your taxes.

As you might expect, limited companies have more responsibilities than sole traders.

Selling a business as a sole trader

Sole traders need to let their staff know when they’re selling the business and the reasons why. You also need to tell staff about redundancy terms or relocation packages.

In terms of taxes, you can use an online form (accessed by using Government Gateway) to tell HMRC that you’ve sold your business. This essentially de-registers you for Self Assessment and National Insurance responsibilities.

That being said, you need to send a final tax return by the 31 January deadline and include the date you stopped trading.

If applicable, you may be able to transfer your VAT registration number to the new owner.

Finally, you may have made a capital gain from the sale, whether it’s cash for selling the business or assets that you keep. You should check whether you owe any capital gains tax and whether you’re entitled to any reliefs.

Selling a business when in a business partnership

Firstly, check your business partnership agreement, as there may be restrictions and conditions on selling.

The steps are broadly the same as sole traders, but the tax return you need to send depends on whether you’re selling the whole business or just your share of the partnership.

If you’re selling your share, then you need to send a personal Self Assessment by the deadline.

If you’re selling the whole partnership, the nominated partner needs to send a partnership tax return by the deadline (and you still need to send a personal one, too).

Selling a limited company

The steps depend on whether you’re selling your shareholding (for example, you’re the sole owner), or a limited company is selling part of its business.

When selling your shareholding, you need to:

  • appoint new directors before resigning as one yourself, letting Companies House know (it’s possible to stay on as a director after selling, aiding the transition)
  • check whether you owe capital gains tax
  • let finance providers know within 21 days of the sale, if you’ve secured business finance against personal property (for example, your mortgage)
  • think about transferring the VAT registration number to the new owner

When selling part of a limited company, you need to:

  • tell staff about the changes, including when and why that part of the business is being sold
  • give details about redundancy terms of relocation packages

Is there anything else you’d like to know about selling a business? Let us know in the comments below.

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Sam Bromley

Written by

Sam Bromley

Sam has more than 10 years of experience in writing for financial services. He specialises in illuminating complicated topics, from IR35 to ISAs, and identifying emerging trends that audiences want to know about. Sam spent five years at Simply Business, where he was Senior Copywriter.

We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer

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