How to write a business plan for a potential sale

There are many reasons why you might want to sell your company. You may have set out from day one with that as the end goal or you might have received a buyout offer and want to get the best possible deal for this acquisition. You might even be handing your business on to the next generation.

But whatever the reason is for selling up, you’re going to need a solid plan to get the best value from the company, and the maximum price.

In this article we explain the key elements to include in your plan if selling up is your key business goal.  

Is selling up part of your business plan?

Some people set up their business with the goal of selling at a profit, right from the start. Some owners don’t think about selling until an interested buyer comes and knocks on their door.

But there are a lot of business owners who sit somewhere in the middle. And if that’s you, it may be time to make a plan.

There can be huge value in having a 5-year plan to go through the process of making your business more attractive for sale – when, and if, the right buyer comes along. You can create a valuable, well-run business that’s attractive to your staff, customers and prospective buyers.  

Having the best possible team on board

Your team, and the people in the business, become very important when you’re a business owner. And if your long-term goal is to sell the company, you need to ask yourself if the business could run effectively without you in it. If you have to be in the office every day, you don’t have the right team.

To get your team up to speed, you need to take some decisive action:

• Identify the staff members who have the potential for growth within your business

• Highlight the employees who aren’t going to help your business get to the next level.

• Lose the deadwood and recruit the right talent into the team

• Motivate your team around your key goal of selling up.

Communicating your goal clearly and openly

To motivate your team around a future sale or succession, people must feel involved in the success (and future sale) of the business. If you communicate your desire to sell, lay out your strategy and get your team on board, this sets the right foundation.

If your key management are focused on your strategy, and know that the new owner will want them on board to run it, that’s a real incentive. It motivates people, gives them job security and creates ownership. On the flipside, if your best staff aren’t aware of the sale, that is a recipe for disaster.

Generally speaking, the top team will tend to leave if that’s the case, meaning you miss out on the value they’re currently adding.  

Understand your industry and market niche

To write a robust plan, you need to analyse your industry and niche, so you’re aware of the market that you’re planning to sell into. Certain industries will be focused on turnover or gross profit.

Others may be focused on brand profile and buying up innovative companies that are pushing the envelope in a particular sector or niche.

To make your company attractive:

• Know who your potential buyers are – research the market and find out which players have the available finance and what they may want from acquiring your company.
• Work on your brand profile – the brand you’ve created can be an important thing for a buyer. Whatever your unique selling point (USP) is in your market, it’s important to try and make that more and more attractive.
• Be innovative and disruptive – it’s usually smaller businesses that can try new things and be disruptive in the marketplace. If you innovate and create a niche, a bigger fish may come along and swallow you up… at a tidy profit.

Getting the company looking ship-shape

Before you put the company on the market, it’s important to streamline the business and tidy it up, from a tax and accounting point of view.

So, for example, if your business has a lot of subsidiaries, has trusts or different share option schemes that have lapsed, it’s time to do some housekeeping. If you don’t tidy up these loose ends, they can cause issues when it comes to tax and the due diligence process.

To prepare the business for the forthcoming sale:

• Have a spring clean of your company structure – so everything is up to date when it comes to directors, company officers, share ownership and trusts etc.
• Set up share ownership tax-efficiently – if you own shares in a company for more than two years, you qualify for entrepreneurs’ relief (ER). This means there’s a good tax-planning opportunity to allocate company shares to your spouse or children and use their tax allowance and ER to maximise your return.
• Plan ahead and be ready – if someone turns up with a big pot of money and offers to buy you out, you need to be ready. Plan ahead and put some thought into your structure, tax planning and future-proofing your business.

Creating a robust plan for a sale

Once you know that a sale is your end goal, it’s time to make a plan. Your target might be a bigger turnover, higher profit, or a great management team.

Pin down those goals, create a business plan and set milestones along the way that can be reviewed every six months to check you’re on target. This way, you can see if you’re going in the right direction, if this is the right plan and if you’re hitting those objectives.

And remember, just because you want to sell, that doesn’t mean someone wants to buy – so it’s critical to have a back-up plan. If Plan A doesn’t happen, you’ve got to be ready with Plan B.  

Helping you achieve the ideal sale

If you’re looking to sell your business, talk to us so we can help you avoid the common pitfalls. We can help you to streamline the business, set up the relevant tax planning and work with you to assess your market and find the ideal buyer.

With the right business plan in place, we’ll keep you on track so you achieve the best possible return on your investment.  

Download our free Exit Planning Handbook here:

Talk to one of our Business Advisers about creating a plan to sell your business.