Preparation is critical to achieving the best price. Once you have decided that it is the right time to sell, undertaking an exit review in advance of putting your company on the market means a smoother and generally quicker disposal process and ultimately a higher valuation.

1) Developing an action plan

Firstly, you must focus on the key drivers that will increase the disposing company's exit price and position it in the most appealing way to potential buyers. A good place to start is to identify any weaknesses that a buyer would highlight during the due diligence process such as the following.

  • Quality of books and records.
  • Over exposure to a few major clients.
  • Quality of customer base and customer contracts.
  • Stickiness of sales and customer churn.
  • Inadequacy of protection around intellectual property and licensing.
  • Over dependence on owner.

Ideally, there should be an incentivised, competent management team that will stay with the business after sale.

Selling a business often includes assets such as goodwill, trade marks or client lists as well as physical assets. Therefore it is important to determine what you are selling and whether this is to be done through an asset or share sale. It is vital that any structure is considered from a tax perspective and advice obtained accordingly.

Once the potential weaknesses are identified, an action plan should be designed to minimise these risks.

2) Execute action plan

The time taken to execute an action plan can vary from three months to a year depending on the actions required though it is advisable that all items identified are achievable and are completed in an efficient manner.

3) Ensure all commercial and financial risks are minimised

A good quality finance team helps give buyers and investors comfort in the business' performance and builds a level of trust. Generally all books and records should be in good order and up to date. Detailed management and financial accounts for the last three years should be available and all liabilities should be reduced as much as possible. In particular, make sure all tax payments are up to date.

On the completion of the action plan, all commercial and financial risks identified in step one should be minimised.

4) Identify potential buyers in the industry

It is helpful if you can identify potential buyers in the industry and try to ensure that your business meets their acquisition criteria. Ultimately a financial adviser should be able to complete a sector and competitor analysis and advise you on how to change the company's positioning to increase its valuation multiple. Other advice would include detailed analysis on current company valuation, an evaluation of growth strategy together with a review of exit options.

5) Appoint experienced financial advisers

Appointing the right adviser is critical to achieving the best price for your business; they should be able to leverage contacts and know how to prepare your business for sale. If possible they should have specific knowledge of your business sector. It is important that you evaluate the whole team that will be advising you and that you ensure you will have access to senior advice at all times and not just for initial negotiations. Any financial adviser should be able to provide references from recent transactions completed if required.

In particular an experienced adviser will prepare an information memorandum which is ultimately a sales document outlining the background of your business, market overview and market position, an overview of the historic financial performance of the business and projected financial performance over the next three to five years.

A professional adviser will assist in setting a fair price. A professional business valuation can be done using a number of valuation methods such as asset based, discounted cash flow or earnings based multiples. Ultimately a valuation carried out by a professional is likely to be regarded favourably by potential buyers.

A professional adviser will manage the sales process, control the due diligence process, help assess heads of terms, offer letters, sale and purchase agreements (along with your legal advisers) and assist generally in negotiations.

Though selling your business can be a long process, taking the time and professional resources to adequately prepare for sale will make the disposal process quicker and easier and maximise the value you will get in return.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.