Making the Most of Your Accounting Services

« Back to Home

Time to Retire? What You Need to Know About Selling Your Business

Posted on

Thousands of baby boomers are coming to that age now where they want to retire and enjoy the fruits of their labour. You may count yourself among their number and have worked hard to build up your small business over the years. As this enterprise is a profitable going concern, you should think about selling so that you can generate a nice nest egg for your retirement years. But what is involved here, and how do you gather all the information to proceed?

Assessing the Market

There are many potential buyers for a good, profitable business. After all, it takes away a lot of the risk associated with a pure start-up, and it's no wonder that companies like this can be so attractive. Yet this is definitely a complicated marketplace, and it's not always easy to present a business in its best light. It can be even harder to arrive at a valuation and something that is likely to sell.

Getting Things Ready

To begin the process, you will need to ensure that your financial house is in order. If you haven't already got a good accountant, this is the time to acquire one. Your new accountant will then help to get your accounts up-to-date and presented in an acceptable industry format. They'll ensure that your tax obligations are in line and download any documentation you may need for a would-be buyer.

Business Valuation

There are many different ways to arrive at an evaluation. However, one of the most common approaches is to multiply the net profit of the business by a certain factor, depending on the industry. Typically, this will be the net profit before taxation and before any depreciation or amortisation elements have been taken into account.

Shrewd Adjustments

You may need to adjust the net profit calculation to strip out any costs that the new owner may not necessarily incur. This can include any benefits that you may have taken out of the business in lieu of salary, such as a vehicle of some kind. The assumption here is that the new owner will not necessarily need to do the same thing, and you would therefore add that amount on top of the net profit calculation before applying the multiple.

Post Sale

You also need to think about life after work. If you can agree on terms with the new buyer at an acceptable price, there will almost inevitably be a hefty chunk of tax to pay. Your accountant can help you manage this to the best effect, but they can also help by giving some investment advice as well. If need be, they'll bring in experts in a particular field to help you arrive at a decision.

Don't Go It Alone

Selling a business is a big undertaking, but it is a great deal easier when you have an accountant at your side.