Structuring your deal when selling your business
If you’ve decided to sell your business, you’re likely to find that there are a number of steps involved in the process. Each one of them could make a difference to the overall success of your sale; from how many prospect buyers it attracts, to the amount of money you can earn from it.
Before you put your company up on the market, it may be worthwhile to consider what the ideal result is, and the best solution to reach that goal. While everyone will want to try and get the highest possible price when selling their firm, there’s much more to these types of transactions than just the cost – and this is why you should take the time to figure out what you would like from the trade and how’s best to get it.
Creating the perfect deal structure
Deciding on your terms is an important part of the process, as it can determine the flow and outcome of the transaction (and ultimately, what you gain from it all). Alternate payment methods can often be a good balance for everyone, which is why it’s often worth taking some time to learn more about the different options available to you.
Here are a couple of the things that you might want to take into consideration to make the best deal structure:
Structuring the deal as a series of transactions
In a lot of instances, you’ll be paid in full cash after the transaction and can walk away with no problems, but there are times where a buyer may wish to pay in smaller instalments over a set amount of time. This can be a simpler option in many ways and if you charge interest on this, you could earn more money from the sale (although it will come in smaller increments).
There are other selling options, too. The most common is full payment on completion, but some may prefer another method, such as a settlement of shares in the business. Payment methods are important to all parties involved, so be sure to carefully consider everything that’s available to you.
Are you selling the business or just its assets?
This is an important thing to ask yourself, as there is a big difference between selling the company in its entirety than just its assets.
Buyers who purchase the shares of the company will own both the assets and the liabilities of the business, rather than just its assets. In these instances, many will want to do their own work during the process to reduce their risks as much as possible. Most sellers pay less tax on profits from sales of a whole business, which is certainly something that you may not want to overlook.
Is an earn-out clause worth it?
Some buyers may desire an earn-out agreement, essentially meaning that you’ll receive payment based on an agreed value, which will be determined by the overall success and profit of the company. This isn’t ideal for everyone, but that’s not to say that it isn’t a feasible option nonetheless.
Telling your employees
A business transfer isn’t always the easiest situation for staff members, which is why it’s important to decide on how you will go about it. UK laws dictate that any obligations will be carried over to the new owner after a sale, which in some instances can also cause complications for buyers. The silver lining here is that this isn’t necessarily a bad thing in instances where the current employees are integral to the operation of the business.
Consider the handover period
You should also take the time to decide on the details of a handover period, which essentiallywill determine if you sever ties immediately after the sale or stick around for a transition period. This is entirely up to you, so remember that there can be advantages to both options.
Hiring a team of professionals to assist you
It goes without saying that there are many different things to consider and take care of when selling a company; perhaps more than you fully realise. Because of this, it can often be a wise idea to get the help of someone with more experience in these types of procedures.
Each firm and transaction, as well as the terms, are unique – and a business transfer agent can often help in a variety of ways, from helping clients to decide on the best terms for their needs to finding prospective buyers and negotiating on your behalf. For these reasons (and more), it’s not hard to see why hiring an expert can be an excellent idea.
Please note that the information provided on this page:
- Does not provide a complete or authoritative statement of the law;
- Does not constitute legal advice by Net Lawman;
- Does not create a contractual relationship;
- Does not form part of any other advice, whether paid or free.
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