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The Legal Audit - Strategic Steps for Preparing Your Business for a Successful Sale

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The final part of our growth series considers the strategic steps a business owner should take when planning for a successful sale. Selling your business can be a complex and daunting process that requires careful planning and execution. Whether you’re considering an exit strategy from your business or responding to market opportunities, preparing your business for sale is a critical process which can impact the success and efficiency of the deal in the long run.

Here is a guide to some of the essential steps you can take for a smooth and successful sale:

1.    Financial Preparation

The most important thing that any prospective purchaser of your business will consider is its financial position. As a seller, it is crucial that your financial statements are accurate, up-to-date and well organised. Purchaser’s will be closely scrutinising these documents so it's vital to have accurate, clear, and transparent financial history from the outset. This includes income statements, balance sheets, cash flow statements, profit and loss statements and tax returns.

It is also important that you identify and address any potential profitability issues before putting your business on the market. This may involve reducing unnecessary expenses, streamlining operations, and optimising the use of your assets to position your business as a lucrative investment and realise the potential value of the business at the ultimate sale. To assist you with this, engage with your financial professionals such as accountants and financial advisers, to help you understand the financial health of your business and strategize maximising its value.

2.    Operational Efficiency

As part of the due diligence exercise in any sale of a business, the prospective purchaser will require access to your company’s information and documentation to identify and assess risk in the transaction. This can seem a document-heavy task which can be overbearing for business owners.

To avoid the stress, start early by clearly documenting all operational processes, policies and procedures of the business. Ensure that all customer and supplier contracts are well-documented and up to date. This helps potential purchasers understand how the business operates but also makes the transaction smoother for the new owners.

If you want to sell your business and walk away, you should also look to minimise the business’s dependence on your personal involvement as a business owner. This can be achieved by delegating responsibilities within the business, establishing a strong and capable management team who can carry the business forward after the sale, and implementing systems or technology that can provide automation which will allow the business to function independently.

3.    Due Diligence

Carry out regular and comprehensive legal reviews of your business with your professional legal advisers to identify and resolve any potential legal issues which may arise through the due diligence phase. This includes identifying contracts, employee agreements, intellectual property rights and compliance with industry or regulatory requirements. Try to anticipate the issues and enquiries that may come from the purchaser early in the deal, by creating an organised data room with all the relevant documents that the purchaser will require. This helps streamline the due diligence process and demonstrates transparency to purchasers.

4.    Brand and Marketing

Take time to invest and strengthen your business’s brand and reputation. A positive brand image can significantly enhance the value of your business and a strongly developed marketing strategy can showcase your business to potential purchasers. This may include creating marketing materials, leveraging online platforms, engaging with specific networks, or leading a marketing campaign for your business.

 

5.    Valuation and Pricing

To ensure you achieve the best value for your business, you should enlist a professional advisor to value your business to determine the fair market value. This will help you set a realistic and competitive asking price and filter out any unrealistic offers. Business owners should also keep an open mind and be flexible on deal structures to suit their needs and expectations, such as earn-out provisions or seller financing to fund the sale. Having flexibility in your deal structure will attract your business to a wider range of prospective purchasers.

Preparing your business for sale is a careful ongoing process that involves addressing financial, operational, legal, and strategic aspects of your business. By investing time and effort into these key areas, you can increase your likelihood of a profitable and successful sale. Engaging with professionals such as accountants, financial advisers and legal experts can provide you with invaluable guidance and advice throughout the process. Remember, thorough preparation not only enhances the appeal of your business but also ensures a smoother transition for both you and the new owners.

Need more assistance?

Get in touch if you would like to find out more about legal audits and how to prepare your business for sale.

Is your business embarking on its next phase of growth and looking for specialist advisors to help ensure the value and growth of your business accelerates in the right direction? Our corporate team are experts in this area, and they provide clarity and understanding to ensure you as a business owner are in the strongest position in the event of a sale. Our advisors turn any complex legal problem into a simple solution.

Contact us on 0151 305 9650 or email stuart.capstick@glenvillewalker.com for further information.

This article is not intended to be interpreted as advice.

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