How to Sell Your Business

Clive Stanley of Warwickshire-based M&A advisors, Acqius, shares his advice for maximising returns and minimising stress.

Selling your SME can be life-changing. All those years of hard work finally realised in a payment that might give you financial independence or at least free you up for your next exciting project. But it can also be fraught with difficulties. My Acqius co-founder Rob Whorrod and I have created, developed and sold manufacturing companies worth over US$50 million. Here are some tips I’ve picked up along the way.

Be precise with your valuation

If you want to attract serious buyers and get as good a return for you as you can, it’s important you are realistic and precise in how much you think your company is worth. But don’t undervalue it.

EDITDA figures and industry multiples are, of course, important guides for a reasonable price. But your achievements – from trade awards to innovation with a certain product and patents – can carry a lot of weight for potential buyers too. 

If you experienced one-off costs, from office fires to personal upheaval, don’t let them lower your value. If your profits for a year would have been £150,000, if it hadn’t been for the costs occurred for something that will never happen again, record them as £150,000.

Be wary, also, of undervaluing your thriving businesses in a weak market, and overvaluing it in a booming market. Canny potential acquirers will look for long-term prospects and stability.

Make marketing clear

Make sure your business USPs are easy to understand in any marketing you or an advisor produces. This is your window to the market place, so poor-quality teasers and other marketing documents are a complete waste of time. 

Get the right type of buyer

Your company’s size, revenues, opportunities for growth and how easy it will be to integrate into another firm or group structure are all factors that determine who are likely to be the best purchasers to target. Each case will be slightly different, but as a general rule:

A business with long-term stability and an established client base and supply chain will appeal to other firms in the same sector or private equity firms. But the trade buyer will probably look to add your firm’s products, services and areas of expertise to its own operations and, as a result, will probably offer a higher price than private equity.

Businesses in fast-growing sectors – from data handling to non-alcoholic drinks – can appeal most to private equity or venture capitalists, who may make offers based on enormous potential growth, rather than current profits.

Angel investors can be a good option to pursue for smaller businesses, as they are often looking for returns from more modest growth and scaleup. They are more likely to want the current business owner to remain in situ though, so might not be a great choice if you want to retire or move on.

Don’t get bogged down in sale processes

Accountants and lawyers may tell you that the paperwork and meetings needed to thrash out a sale can take months. Take this advice with a large pinch of salt. For most acquisitions, things like sale and purchase agreements are almost exactly the same, from one deal to the next. There’s no need to reinvent the wheel. There’s no need for lots of discussions either. Most deals could be done in a few weeks or days. Make sure you keep your legal and financial advisors ticking along, or they’ll cost you huge amounts unnecessarily.

Be well-prepared

A deal is likely to be far less prolonged and tricky, if you carefully prepare your business file structures in advance including all your due-diligence material for a prospective buyer to look at. Each acquirer will have different requirements and careful analysis early on will make all the difference. Do not under-estimate the amount of time this takes so our advice is to start the process as early as you can, even years in advance if possible. 

Acqius offers a wide-range of sell-side and buy-side acquisition services for SMEs, large corporates, entrepreneurs, startups and other firms. These include exit strategy planning, buy and build strategy planning, acquisition planning, valuation advice, capital raises, acquirer research, wealth management introductions and financial modelling and planning.