How to Prepare Your Business for Sale

In short: Preparing your business for sale means getting it into a state where a buyer can understand it quickly, trust its numbers and see that it will keep performing without you. In practice that involves deciding what you want from the sale, getting a realistic valuation, putting financial records and company paperwork in order, organising the information a buyer will ask for, and keeping the business trading well while the sale runs. The work that adds most value takes years, while the housekeeping can be done faster, so the best preparation starts well before you approach a buyer.

Most owners decide to sell first and prepare second. Buyers notice, and they price it in. A business that arrives in the market ready for scrutiny tends to attract more interest, move faster and hold its price better through negotiation. This article sets out what preparation involves in practice. It sits within our complete guide to business exit planning, and if your priority is making the business worth more rather than making it ready, our guide on how to increase the value of your business before selling covers that side.

What does preparing a business for sale involve?

Preparation runs along three lines at the same time. There is the business itself, which needs to be worth buying and capable of running without you. There is the paperwork, which needs to stand up when a buyer's advisers examine it. And there is you, because a sale works best when you are clear about what you want from it and what comes afterwards.

Owners tend to focus on the first, neglect the second and leave the third until the end. The deals that go well usually involve attention to all three, in an order that reflects how long each takes.

Where should you start?

With what you want. The amount you need from the sale, the route you would prefer and the timing that suits you all shape the rest of the plan. A sale to a trade buyer, a management team or family members needs different preparation, and a figure you need to reach is only useful once you know how far the business is from it. Our guide on how to create a business exit strategy works through those questions.

Next, get a realistic view of where you stand. That means an honest assessment of what the business is worth today and what is holding the figure down. Our business valuation calculator gives an indicative starting point, the Exit Readiness Scorecard shows which areas a buyer would find weakest, and a formal business valuation gives you a figure you can plan around with confidence.

How do you get the financial records ready?

A buyer will want several years of accounts, recent monthly figures and an explanation of anything unusual, and they will expect all of it to agree. That means management accounts that reconcile to the statutory accounts, tax returns filed and paid on time, director loan and related party balances clearly recorded or resolved, and evidence to support any adjustments you want a buyer to make to reported profit.

Cash and assets that a buyer will not want also need thought. Surplus cash, vehicles, investments or property held in the company may need to come out before a sale, and each route has tax consequences, which our guide on extracting cash from a company before selling explains.

Our guide to due diligence when selling a business covers what a buyer's accountant will look for in detail. The point here is simpler: financial records that need explaining slow a sale down and give a buyer reasons to reduce the price.

What legal and company housekeeping is needed?

Much of what goes wrong in a sale is not financial. It is paperwork that was never completed, never signed or never updated. Areas worth reviewing well before a sale include:

• Customer and supplier contracts that are written, signed, current and held in the company's name
• Shareholder agreements and articles of association that reflect what the shareholders now intend
• Statutory registers and Companies House filings, including details of who controls the company
• Employment contracts that match how staff actually work and are paid
• Intellectual property, such as software, designs and brands, properly assigned to the company
• Leases, licences and permits, and whether they can transfer to a new owner
• Any disputes, claims or informal arrangements that a buyer would need to know about

Consider a Middlesbrough manufacturer whose largest supply arrangement has run for years on a handshake and a series of emails. It works perfectly well day to day. To a buyer, it is revenue with no contract behind it, and it may be valued accordingly. Putting it on a proper footing takes a conversation with a long standing customer, which is far easier to have before a sale than during one.

Some of these issues also affect how the sale can be structured. If the company owns its premises, or holds activities a buyer will not want, the choice between selling shares and selling assets becomes more complicated, as our guide to asset sale vs share sale explains. Your solicitor should be involved in this review early, alongside your accountant.

How do you organise information before going to market?

Once a buyer is interested, they will ask for a great deal of information quickly. Sellers who have to assemble it from scratch lose momentum, and delay gives a buyer time to reconsider. Preparing the core documents in advance, organised in a way that can be shared securely, makes the process faster and creates a better first impression.

It also lets you control what is released and when. Early on, a prospective buyer needs enough to make an offer, not everything. Sensitive information such as customer names, pricing and staff details is usually shared in stages, and only once confidentiality agreements are in place.

How do you keep the business performing during a sale?

A sale takes far more of an owner's time than most expect, and that time comes from somewhere. Trading performance slipping during the sale process is one of the most common reasons buyers revisit the price, because the results they agreed to buy are no longer the results the business is producing.

The protection is a business that does not rely on you to keep it running, with managers who can hold performance steady while you deal with the sale, and a budget for the year that you are confident of meeting. If you want help assessing how well your business would hold up while you are focused elsewhere, our exit planning team can review it with you.

How far ahead should you start preparing?

Different parts of the work need different amounts of time. Working backwards from when you would like to sell is usually the clearest way to plan.

The tax position runs through every stage, because reliefs and structure need time to put in place. Our overview of tax when selling a business explains why it should be considered at the start rather than at the end.

How can Pulse help?

We help owners prepare for a sale over the years leading up to it, not just in the final months. That includes assessing how ready the business is today, putting the financial records and reporting in order, reviewing the structure and tax position, and working through the issues a buyer would raise while there is still time to deal with them.

When you are ready to go to market, we help organise the financial information buyers will ask for, work alongside your solicitor and any corporate finance adviser, and support you through due diligence and negotiation. Our exit planning service brings that preparation together in one place.

For the wider picture, read our business exit planning guide, or speak to our team about how ready your business is to sell.

FAQs

How do I prepare my business for sale?

Start by deciding what you want from the sale and getting a realistic view of what the business is worth. Then work on the things a buyer will examine: financial records that reconcile, contracts and company records that are complete and current, a business that runs without you, and information organised so it can be shared quickly. Most of this takes longer than owners expect, so it is best started well before you approach buyers.

How long does it take to prepare a business for sale?

It depends on where you start. Getting records and paperwork in order can be done relatively quickly. Changes that affect value, such as reducing reliance on the owner or broadening the customer base, need a sustained period of trading history before a buyer gives them full credit, so preparation for a strong sale is usually measured in years rather than months.

What documents do I need to sell my business?

Expect to provide several years of accounts and recent management accounts, tax returns, customer and supplier contracts, employment contracts, leases, details of borrowing and guarantees, company statutory records, and evidence that intellectual property belongs to the company. The exact list depends on the buyer and the structure of the deal, and having it organised in advance makes the process faster.

Do I need a business broker to sell my business?

Not always. A broker or corporate finance adviser can find buyers, create competition and run the sale process, which often justifies their fee on larger or more complex sales. Some owners sell to a buyer who approaches them directly. Either way, you still need your own accountant and solicitor, because a broker's role is to complete a deal rather than to protect your tax and legal position.

Can I keep running the business while it is being sold?

You usually have to, and it is one of the hardest parts of the process. A sale takes a great deal of the owner's time, and trading performance often slips while attention is elsewhere. A fall in results during the sale is a common reason for buyers to revisit the price, so having a management team that can keep the business on track is a real advantage.

What should I fix first when preparing to sell?

Usually the issues that take longest to resolve, such as dependence on the owner, reliance on a small number of customers and any structural or tax matters that need time to settle. Records and paperwork matter too, but they can generally be put right more quickly. The right order depends on your business and your timescale, which is why an early assessment is worthwhile.