Some matters to consider when buying or selling your business

Selling a business in the UK is not an easy task. There is a lot to consider, especially if you are selling, tax will raise its ugly head.

So selling a business takes planning and time, Murray Rudin, MD at Lewis & Haden

“If the firm is entering into a deal in which they are only selling a percentage of their business and will continue to be engaged, then other kinds of factors are equally important as price. These factors include the caliber, the reputation, the references, the culture, the chemistry and the trust of the private equity firm or other type of firm they are going to partner with.”

To make sure you get a good deal, there are two things to bear in mind:

1) It’s important to keep calm and trust the professionals. The only thing you can do before making a deal is to ensure you get the best advice and service. Consequently, it’s very important to engage professional solicitors.

2) Secondly, it’s extremely important to be realistic and not expect too high a price.

These are some of the techniques that everyone should take into consideration before any deal.

Otherwise, there’s no correct valuation on the worth of your business, but here are some suggestions:

1)   Take a look at your dividend payments over the past three years and cash flow analysis. The last three years accounts is undoubtedly one of the best methods to analyse the company’s potential and see how well it has been operating.

2)Â Â Â Having one or two major contracts/customers or a wide range of customers.

3)Â Â Â Unrealistic profit growth. This is actually very important as a buyer is unlikely to believe a seller that claims a dramatic growth in profits in the year they sell the business.

4)Â Â Â Finally, other relevant factors to be taken into consideration are:

      - Relocation costs, if appropriateÂ

           - Withdrawal of a product or the closure of a site/factory

           –  Redundancy costs

           - Whether any cash can be generated by selling an asset which is not required

           - Refinancing costs

Lucio Morcillo is a work experience student and has recently finished a Private Law Master at Universidad Carlos III (Madrid)Â

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