Preparing the biggest sale of your life

People selling businesses have to assure potential buyers that the company is viable and that trade is good. Photograph: Sang Tan/AP

A little while ago, I had a designer come and talk to me about working on one of my investment properties. Many times in the conversation she talked about enhancing the value of the property with a few small changes to meet the expectations of my target market. An estate agent had also suggested that the property was designed in style and presented in a way that would be more attractive to the type of purchasers that we were targeting. It is obviously the case that when we sell our homes we always want to achieve the best price. We spend time getting the "house in order". We paint and tidy rooms, clean the windows, cut the grass, etc. It helps us achieve our price expectation and, with the right design, it will make our home more attractive to a wider group of buyers.
So it always surprises me that when business owners sell their most valuable asset, they often miss the window of opportunity to maximise the value and increase their chances of success. What many business owners don't realise is that a very low percentage of businesses actually sell when they are taken to market for the first time. The most common reason for this is that most businesses are simply not ready for sale.
Preparation is essential, start by selecting an adviser who specialises in assisting companies to prepare for sale; they will ensure you focus on areas that will attract a buyer such as:
Management team: Buyers look for confident and strong management teams that are properly aligned with the success of the business. If you are looking to leave the business, you definitely don't want it to be heavily dependent on you.
Your opportunity map: Buyers look for businesses with credible future opportunities; overly optimistic forecasts will turn a buyer off. Buyers look for businesses with high barriers to entry. How easy is it to copy your business? If a buyer could "build" what you have for an investment of £2m, why would they want to pay you more?
Intellectual property: Do you own the rights? Have you protected your intellectual property? You definitely don't want such issues to arise at the due diligence stage of a sale. Such issues will inevitably result in delays, price chipping, or worse scenarios, such as the buyer withdrawing.
Customer and supplier contracts: Review your agreements so you know what's in the small print. A buyer will see long-term customer contracts as good news as it will reduce their risk and give them confidence in the numbers. However, when it comes to your suppliers, single source supply can also be a turn- off to buyers because it may increase the risk within the business. What happens if they go bust or are purchased by a competitor. Could your supply stop overnight?
Understand your potential buyers: Over the years I have been surprised by press announcements on which company has bought which. Business owners often assume that their buyer will be a competitor. It could be, of course. However, spending time identifying buyers where there is some clear synergy between your businesses can be an invaluable exercise. Try to think out of the box and consider buyers who may be in a different market, with existing channels through which to offer your products and services. Time contemplating your universe of buyers will be time well spent. The right purchaser, and typically one who is not your closest competitor, can be the one that pays the highest price. Once you have mapped the buyers who may be interested in your business, you can then position your business for sale to attract the buyers' attention.
Taxation: With the recent introduction of Entrepreneurs Relief, there has probably never been a more advantageous time for a shareholder to sell their company. However, ensure you review your tax position with your advisers to ensure that you can benefit from this relief.
Good documentation: As part of due diligence, your prospective buyer will want to access to your documents, such as general company data, accounts, leases, contracts, business plans and so on. As part of the preparation for sale, pull these documents together in one place. My team at www.blueboxpsp.com can provide an electronic data room (the bluebox vault), which is an online confidential storage facility, dedicated to your company, where you can grant the buyer's advisers access at a time to suit you.
Selling a company isn't easy. It takes time and commitment; issues will inevitably need addressing before you start the process of selling the company. Buyers need the confidence that you have built something that is sustainable, that has a good reputation and, most importantly, they know has a strong future under their ownership. The only way to achieve this is to plan your exit by preparing your business for sale. So seek the advice of experts – you will reap the rewards both emotionally and financially.
James Caan is group chairman of bluebox