Selling or closing a business

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Selling or closing a business

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Why should you read this guide?

Every business comes to an end or changes into something else after a while. If you are lucky you will have control of this. If you are unlucky it will be because the business has not been a success. This guide will give you some information on how to close your business or prepare it for sale.

Background

Succession planning is something that every good business person will have taken into account at some point or another. If you have discounted passing the business on to family or a key employee then you may look to sell the business. If this is not possible then you will be left, usually as a last resort, to close the business.

Closing a business

If you have taken an honest look at the business and decided that there is no value in it or have tried to sell it without success then you may decide to close up and walk away. There are a number of things you need to consider before doing this:

Set a date around two months in advance when you will close the business
Depending on the type of business set a date before this that you will stop taking on new work
If you have borrowing in the business inform your creditors of your intention to close and explain to them how they will be repaid
Decide if you are going to have a sale to sell off stock and when this will be
Inform suppliers and customers of your intention to close and make sure they understand your process so they will continue to work with you until the date set. Tell them about the sale of stock
Inform HMRC and Companies House if necessary
Inform your accountant so they can prepare your final set of accounts.
Decide how any assets will be sold and when the best time to do this is
When it is all over remember to close your bank account

Preparing the business for sale

Most business people will have an over inflated value of their business. If you are considering selling the business speak to an accountant or a business valuer and find out what value they put on the business. If you do this early enough you can make an informed decision as to whether selling is the way to go. If you decide to sell then there are a number of things you should do, including:

Set a realistic timescale to make sure the business appears at its best
Identify and eliminate weaknesses in the current business
Do you need to carry out marketing to bring sales back up to a decent level
Make sure the people in your business are heavily involved in running it and you are not seen as critical to the success of the business
Ensure your paperwork for the business is in good order and that any due diligence that is carried out will reflect this - it is a sign of a well run business
Ensure the finances are in good order and that you have identified what expenses will disappear e.g. your drawings
Find a good company to sell your business for you - you will rarely be the right person to do this
Be prepared to meet with potential sellers and ensure your staff are too. You should also be prepared to commit some time following the sale to work in the business as part of the deal

Summary

Emotions can run high at the point. It is therefore important to have good advisers around you that can handle the sale or closure without emotional involvement. A good sale needs to be worked at and will rarely be achieved overnight and without effort. Like everything else in business if you plan well you will have a better chance of succeeding.

Further information

Many of the larger accountancy practices have pages on their website about selling businesses. There are also many web based companies that sell businesses and they have free information available. Speak to your accountant and solicitor and make sure they have experience or can recommend someone else that can help you through the process.