Selling a Business

How do I get the best price for my business?

Prepare early. The single biggest determinant of price is the condition of the business when a buyer looks at it — owner dependence, customer concentration, clean accounts, secured contracts and staff. All take years to fix.

Find the right buyer, not the obvious one. The highest bidder is frequently a trade buyer you had not considered, for whom your business solves a specific strategic problem. A sale run to a list of three obvious competitors leaves money behind.

Create a competitive process. A single interested buyer is not a negotiation.

Negotiate on evidence. Buyers argue value down using data. The answer is better data, prepared in advance.

Will I pay tax when I sell my company?

Generally capital gains tax on the gain — but Business Asset Disposal Relief (BADR) can reduce the rate on a qualifying disposal, up to a lifetime limit.

Both the relief and its rate have been changing, and — critically — eligibility depends on conditions that must be met well before you sell, including how long you have held the shares, your shareholding percentage, and your role in the company. Restructuring in the run-up to a sale in order to qualify is exactly the kind of thing that fails.

Exit tax planning belongs at the start of the process, not at the end. It is frequently worth more than any negotiation on price.

*(Current BADR rate and lifetime limit to be confirmed on publication — see review note.)*

What does the sale process look like?

Preparation (3–12 months). Fix what a buyer will find. Clean the accounts. Reduce owner dependence. Get the tax structure right. Information memorandum. The document that presents the business. Buyer identification and approach. Discreetly, and to more than one. Offers and heads of terms. Price, structure, earn-out, warranties. Due diligence. The buyer’s advisers examine everything. This is where deals die. Legal documentation and completion.

Six to twelve months is typical. Poorly prepared businesses take longer — and deals that drag tend to die.

What is an earn-out, and should I accept one?

An earn-out defers part of the price, contingent on the business hitting agreed targets after you have sold it.

Buyers like them because they shift risk to you. Sellers often accept them because they raise the headline price. The danger is obvious: you are now dependent on targets being met by a business you no longer control, and the levers that drive those targets are being pulled by someone else.

Earn-outs can be entirely reasonable, but the drafting is everything — and so is the tax treatment, which differs depending on how the earn-out is structured.