For many business owners, the decision to sell a business is a significant milestone—one that can bring both exciting opportunities and complex challenges. Whether you're nearing retirement, looking to free up capital, or simply ready for a new venture, selling your business involves much more than finding a buyer. It requires careful preparation, strategic planning, and the right team to guide you through the process.

A key aspect of this decision is determining how to structure the sale. Typically, there are two main options: a sale of shares or a sale of the business itself. Each has its own pros and cons, from tax implications to operational continuity. Getting sound advice on these options is essential to ensure you make the best choice for your unique situation

Below is a high-level overview of key considerations to keep in mind when selling your business, as well as some lesser-known aspects that can make all the difference.

1. Preparation is Key: Establishing a Solid Management Structure

One of the first steps in preparing your business for sale is ensuring you have a robust management structure in place. Buyers typically seek businesses that can operate smoothly without relying heavily on the current owner, and a well-established leadership team with clear operational processes can significantly boost your business's value. When key person dependency is present, the pool of potential buyers shrinks considerably, a point often emphasised by business brokers when advising on sales. Demonstrating that your business can thrive independently will open the door to a wider range of buyers and increase your chances of a successful sale.

If your business heavily relies on your presence, consider transitioning day-to-day responsibilities to key team members well before starting the sale process. This not only boosts buyer confidence but also ensures the business can continue its growth trajectory post-sale.

2. The Role of Brokers: Finding the Right Partner

Choosing the right broker can make or break the selling process. Brokers bring industry expertise, access to potential buyers, and negotiation skills to the table, but finding the right one for your needs is crucial. A good broker will understand your industry, have a solid network of prospective buyers, and guide you through each step of the sale. However, it’s also important to do your homework—research brokers thoroughly, ask for references, and make sure they have experience with businesses of your size and in your sector.

A lesser-known tip: Consider brokers who specialise in your niche market, not just general business brokers. A specialist can often provide more targeted insights and connections.

3. Understanding Add-Backs: The Secret to Maximising Value

Add-backs are often overlooked but can significantly impact the valuation of your business. These are adjustments made to your financial statements to show a buyer the true earning potential of the business. They typically include non-recurring expenses, personal expenses, or any costs that wouldn’t be applicable to a new owner (for example, your personal car lease, one-off legal fees, or family member salaries).

Presenting a clear picture of your business's financial health, including potential add-backs, ensures buyers understand the true profit potential. Having clean and well-documented financials can help substantiate your asking price.

4. Timing and Market Conditions

Timing can be everything when selling a business. It’s not just about being ready internally—it’s about selling at the right time for your industry and market conditions. Economic factors, industry trends, and buyer demand can all influence your sale price. Keeping an eye on these factors and consulting experts who track market conditions can help you maximise the value of your business.

A unique aspect often overlooked is that while many sellers think the best time to sell is during a period of peak performance, buyers are often more interested in growth potential. Showing a positive trend with future opportunities can sometimes be more attractive than a business at its zenith.

5. Due Diligence: Preparing for the Deep Dive

Buyers will inevitably conduct thorough due diligence before making a final offer, scrutinising every aspect of your business—financials, contracts, intellectual property, customer base, and more. To be prepared for this critical phase, it’s essential to have clear, accurate, and accessible records. Beyond that, ensure customer contracts are signed, valid, and securely stored in a central location. Timing of key agreements, such as leases, is equally important. Are you nearing the end of your lease term? Is there an option to renew? These factors must be addressed early, as leases often need to be assigned, and ensuring the new owners can transition without hindrance is crucial. Conducting internal due diligence first allows you to identify and resolve any red flags before buyers do, setting the stage for a smoother transaction.

In addition to selling outright, you may also want to consider whether it's better to find a successor at the management level and retain equity control, allowing you to stay involved in the business while benefiting from future growth. This is a strategic option worth evaluating, especially if you believe the business has significant upside potential.

Selling your business can be a life-changing event. Whether you're ready to move on to your next venture or simply taking the next step in your professional journey, it’s essential to be prepared. From establishing a strong management team to understanding the nuances of add-backs, the more prepared you are, the smoother the process will be. This is not a comprehensive list and there are lot more things to think about. 

At TWIYO Capital & Advisory, we've helped numerous business owners navigate the complexities of selling their businesses, ensuring they are ready for every step of the process. If you’re considering selling or simply want to discuss your options, feel free to reach out—we're always here for a confidential chat to help you achieve the best outcome for your business.

‍