I want to sell my company, where to start?

The collective wisdom of this place never ceases to amaze me so I thought I’d ask for advice.

In short, I wish to sell my company and have never done this before.

If you know the company or work it out as the discussion proceeds, *please* do not publish the name or links or hints etc. Thanks chaps.

And I understand this might read like an advertisement but I need to give the background and outline some thoughts and maybe I will end up posting it in sales corner, stranger things have been advertised there.

I started a small specialist company within the cycle trade (online retailing) in the 2000’s that was immediately successful and has continued to be very profitable every year.

It's always been a conscious decision to keep things manageable with two directors and a good work/life balance but there is huge potential.

I've thought about early retirement in a few years but this year I was approached by a good customer and engineering consultant looking for a new venture and interested in partnership, investment or outright purchase.

We got quite far down the line but ultimately, he wanted the purchase to be self-funding over a number of years from profits and we could not find an amicable deal.

However, this has spurred us on to pursue a sale perhaps sooner rather than later.

Just dealing with one prospective purchaser and gradually divulging more and more confidential information as trust was built was pretty long winded – putting it out there on the general market I’m not sure what I’d be in for.

For financial reasons (CG etc) I would ideally sell (ie receive payment) over a three-year period and I would like to remain as a consultant employee for 12 months on a nominal wage to ensure a smooth transition, continuity, technical back-up and basically to be on call to hold the new owner’s hand as it were.

I've looked at countless valuation formulas but it is tricky where the business is perhaps more tied up in mainly one person's knowledge and passion but on top of annual profits there has to be a significant value in brand/trust/goodwill/trading history/reputation/potential growth/manufacturing agreements/contacts etc, etc. We don't have significant assets of any form (ie premises/equipment etc).

There is always an issue too that as anyone who works for themselves will know that the accounts are done for the tax man not for prospective sale and hence the job of a good accountant is to paint as grim a picture as possible for HMRC every year.....and every expense possible is accounted for...

Anyway, all advice and thoughts welcome chaps on: how to realistically value, potential solicitors’ fees, how/where to advertise, dealing with buyers etc.

Surely your accountant would be the best person to ask?

Everything else ends up on sales corner. You never know.

I'm honestly not even sure I'm joking.

I would look at competitors or companies that are in a similar industry but not directly in your space..otherwise it’s trying to find a needle in a haystack

Other local people that maybe interested but it’s not easy

When I sold my retail business, the price was based on turnover (for goodwill, fixtures and fittings) plus stock at purchase valuation (rather than sale valuation). I would think you’re looking at dieting similar.

The price based on profit or turnover is for the brand recognition, business knowledge etc, I don’t think you can charge extra on top for that or you’ll effectively be paid twice for the same thing.

A good business transfer agent would suggest a fairly accurate price, it their area of expertise after all.

Finally, do you not already have a reasonable idea of the price from negotiations with your first buyer?

Thanks for the comments;

Mark - for sure and we've had discussions but it's not really an accountants specialist area short of giving maybe a basic 3 x average NP last three years or whatever.

Matt - seriously thinking the same before going fully 'public'.

Andy - it's a business that runs from a small office and with customers worldwide so could be run from anywhere.

Dave - thanks, not sure if we're big enough to involve an agent who would want a fair cut I'm sure. I have a good idea of price based on the last three years average NP and what I could pull out over say the next three years if I carried on and it's a similar figure. I'd look at stock as you say at cost (or effective value if less).

Where I used to work clients would spend £25k on a 100 page report with a variety of valuation methodologies, the summary of which would invariably say that the business is worth whatever the net assets of the business are.

Additional value is added by all of the things you have listed. However, the biggest concern I would have would be how much does this business rely on you for winning and delivering work?

Small businesses often start through a product or service being driven by someone's network and that is lost at the point at which the business is sold. This may be why your previous buyer wanted to pay for the deal over a number of years through the performance of the business.

If your sales are being driven independently of you and the delivery of your products or services do not require significant input from you then you could start increasing the valuation, using historical profit figures for example.

A good source of buyers might be looking in your industry and seeing who offers complimentary products or services to yours but where you do not compete directly. They may well be interested in adding your business to their offering. Do be careful here though. You may benefit from having a third party act on your behalf here as you may not want to announce your intentions just yet.

I would ensure anyone you do enter discussions with signs an NDA, but assume that it is worthless and still remain cautious!

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Originally Posted by gingerpaul

Where I used to work clients would spend £25k on a 100 page report with a variety of valuation methodologies, the summary of which would invariably say that the business is worth whatever the net assets of the business are.

Additional value is added by all of the things you have listed. However, the biggest concern I would have would be how much does this business rely on you for winning and delivering work?

Small businesses often start through a product or service being driven by someone's network and that is lost at the point at which the business is sold. This may be why your previous buyer wanted to pay for the deal over a number of years through the performance of the business.

**If your sales are being driven independently of you and the delivery of your products or services do not require significant input from you then you could start increasing the valuation, using historical profit figures for example.**

A good source of buyers might be looking in your industry and seeing who offers complimentary products or services to yours but where you do not compete directly. They may well be interested in adding your business to their offering. Do be careful here though. You may benefit from having a third party act on your behalf here as you may not want to announce your intentions just yet.

I would ensure anyone you do enter discussions with signs an NDA, but assume that it is worthless and still remain cautious!

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Very helpful - I recognise much of that advice and it is very much a business that will run without me once a transition has taken place - I built it and had the ideas but all sales and growth have come through word of mouth and reputation and the bit I have ** in your quote does apply for sure.

We did discuss NDAs with the prospective buyer but perhaps in my naivety with much back and forth discussion I was happy to proceed without in that particular case but throwing it out there to a wider market is more of a concern of course.

Great position to be in, congrats. Daltons Business would be a good place to start with. I would look for similar business and see what narrative they have used, valuations are always interesting ?

I would also look at some of the listing agents, their websites and maybe give them a call to pick their brains.

Have you written a document to pitch the business? Would you be able to summarise the business in a side or two of A4 and make a few compelling reasons for people to be interested? You mind find that a useful way to start thinking about it in your own head, and it will provide you with a tool to explain to any professional advisors or prospective buyers what the proposition is that you are offering.

I would avoid specifics, or even naming the business, but you could include some attention-grabbing information. An overview of the business, sector, industry, etc combined with some financials like revenue £, revenue growth year on year, profit £, profit growth year on year. Explain why your business is unique and what potential there is for the future.

From your previous discussions you probably know the quantum of how much you would want in order to sell the business. From there you could approach a few sell side advisors, at an appropriate level for the value of the business, and see if they would be interested in working with you. You may find that fees spent here may pay for themselves and then some if they improve the terms of any deal you do.

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Originally Posted by gingerpaul

Have you written a document to pitch the business? Would you be able to summarise the business in a side or two of A4 and make a few compelling reasons for people to be interested? You mind find that a useful way to start thinking about it in your own head, and it will provide you with a tool to explain to any professional advisors or prospective buyers what the proposition is that you are offering.

I would avoid specifics, or even naming the business, but you could include some attention-grabbing information. An overview of the business, sector, industry, etc combined with some financials like revenue £, revenue growth year on year, profit £, profit growth year on year. Explain why your business is unique and what potential there is for the future.

From your previous discussions you probably know the quantum of how much you would want in order to sell the business. From there you could approach a few sell side advisors, at an appropriate level for the value of the business, and see if they would be interested in working with you. You may find that fees spent here may pay for themselves and then some if they improve the terms of any deal you do.

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Thank you. Very much so, as a result of the prospective contact although he did not proceed I have learnt a lot and spent a lot of time doing exactly that and refining and refining the proposal. Six pages of A4 detailing the history, set up, finances, strengths, potential and ideas for growth and much more. This could certainly be condensed to a couple of pages of salient points. It's not just another 'cycle parts retailer' business. We are very much more niche, high end and dare I say one of the respected and 'cool' brands out there with a very loyal customer base.

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Originally Posted by Max...

Thank you. Very much so, as a result of the prospective contact although he did not proceed I have learnt a lot and spent a lot of time doing exactly that and refining and refining the proposal. Six pages of A4 detailing the history, set up, finances, strengths, potential and ideas for growth and much more. This could certainly be condensed to a couple of pages of salient points. It's not just another 'cycle parts retailer'. We are very much more niche, high end and dare I say respected and 'cool' brands out there.

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Word of mouth is best way to sell a business. You need to find well connected people in your local business community and/or sector community.

Plenty of Angel networks, PI/PE Networks etc once you get out talking to people in that world.

I would avoid the business sale agents, most are just glorified listings and wouldn't know how to buy/sell a business for the right price to the right people. Look at SC sales vs all teh sales done on Heroes & Villians thread, most deals are done off book i.e. not advertised publicly on Daltons etc.

I know lots of people in Yorkshire I could connect you with, obviously a strong cycling community up here too (I'm not one of them), many of these connections can do national deals doesn't have to be in Yorkshire.

I might be intersted myself, I'm looking for my next opportunity. Bored of my current business.

PE, stock at value and some goodwill to your biggest competitor is a good place to start

Use an intermediary to draw up an NDA before any information changes hands, then it’s heads of agreement and due diligence.

If it were my business and you wanted to buy it, assuming that you could afford it and were in receipt of a reasonable historical accounting disclosure - how much would you be prepared to pay ?

Have you checked WTB?

Unless you know your way around a complex tax warranty and all the other due diligence and legal agreements that go with a company sale, I would suggest you appoint a law firm that has experience in company transactions. A sales agent will be able to fight your corner in negotiations with prospective buyers and could well identify buyers you hadn’t considered.

Without knowing the sector of the market your in, a chap called Charlie sold his business a few years back, the new owners moved the business up north from the south coast, from memory he just posted up that he was looking to sell, it may have been more involved and I’m sure it probably was.

Thanks all - appreciate all the advice.

ViperStripes; I think you're right and the STW boys in Todmorden would be a good place to start.

Joyce; it's difficult as that depends so much on the individual's position, vision, plans etc.

smalleyboy; if this is your field can you elaborate please?

bloater; a name from the past, guessing Charlie the b... :)

Selling an online retail business is much easier than a business with property, branches, employees etc assuming you do everything yourself.

This is an interesting website for e-commerce businesses - https://empireflippers.com/sell-ecommerce-business/

While on this website go to Marketplace to see other e-commerce businesses for sale based on their turnover..

Max - I worked for a niche professional services company that was sold to a much larger entity (AIM listed). The due diligence was extensive and how you deal with things like potential liabilities that may never arise, under/over payment of tax for example, are complex. Even just trying to tie down the terms of you remaining in the business for a set period of time and what happens if you want to leave earlier, suffer ill heath and can’t work, decide to take your foot off the gas etc all need to be considered contractually.

Each side wants to be very clear what they’re responsible for, what they are paying for and where liabilities sit. A business agent acts as a buffer between you and the buyer when/if things get challenging.

I believe anyone in such a situation, needs guidance and support from professionals who are experienced in it.

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Originally Posted by Max...

For financial reasons (CG etc) I would ideally sell (ie receive payment) over a three-year period

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Definitely worth taking advice but Business Asset Disposal Relief is very good news if you are eligible. It's rather beyond my pay grade now but in terms of the three year period, you obviously have to distinguish between deferred consideration (certain but paid later/in stages) and contingent consideration (you get more or less later subject to conditions).

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Originally Posted by David_D

Definitely worth taking advice but Business Asset Disposal Relief is very good news if you are eligible. It's rather beyond my pay grade now but in terms of the three year period, you obviously have to distinguish between deferred consideration (certain but paid later/in stages) and contingent consideration (you get more or less later subject to conditions).

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Thanks David, as I understand it we get entrepreneurs relief bringing CG down to 10% on the 12.5k allowance each year?

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Originally Posted by Max...

Thanks David, as I understand it we get entrepreneurs relief bringing CG down to 10% on the 12.5k allowance each year?

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I honestly don’t know; my knowledge is well out of date and BADR replaced Entrepreneur’s Relief quite recently. I’m not sure you can have BADR and take advantage of more than one annual allowance. Definitely worth taking advice so that you can aim to structure a deal as tax efficiently as possible (obviously subject to what the purchaser wants).

Entrepreneurs Relief became Business Asset Disposal Relief from 4/20, summary here https://www.rossmartin.co.uk/private...ef-at-a-glance.

Make sure you get good tax advice in advance on any potential sale agreement, you can't change the tax consequences retrospectively.

Thank you.

How old is she?

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Originally Posted by Kingstepper

How old is she?

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She=the company?

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Originally Posted by deepreddave

Entrepreneurs Relief became Business Asset Disposal Relief from 4/20, summary here https://www.rossmartin.co.uk/private...ef-at-a-glance.

Make sure you get good tax advice in advance on any potential sale agreement, you can't change the tax consequences retrospectively.

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Entrepreneurs relief tax came in just at the right time for me, I sold my stake in an online business and in the same tax year sold a property that was refurbished just for profit, the business sale used the ERT and the house sale used CGT.

As said get a good accountant with business sales experience.

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Originally Posted by murkeywaters

sold a property that was refurbished just for profit, the business sale used the ERT and the house sale used CGT.

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That’s (almost certainly) a trading activity subject to income tax! If you had an accountant advising you on that, maybe consider finding a new one. A lot of things don’t see the light of day with Self Assessment and HMRC doing very few checks. You’re still liable if it does come to light.


2010 article but the principles are still current:
https://www.taxinsider.co.uk/propert...-taxable-trade

This is mikes out of my sphere of understanding. I do have a friend who has a cycle business, part unit/high street and part online. I don’t know if he’s looking to grow or add or if it’s something he could afford or would fit his model. Happy to mention if you can share anything where I may be able to gauge if any interest at all.

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Originally Posted by tz-uk73

This is mikes out of my sphere of understanding. I do have a friend who has a cycle business, part unit/high street and part online. I don’t know if he’s looking to grow or add or if it’s something he could afford or would fit his model. Happy to mention if you can share anything where I may be able to gauge if any interest at all.

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Thank you. I will PM.