| Some entrepreneurs start a business with a view to eventually selling it – the ultimate crystallisation of the long hours they have put in to make it a success. For such people, the process of grooming a business for sale will start from the word ‘go’. But this illustrates an important point for lesser mortals who have not made such grand plans. Preparing a business for sale is not a case of window dressing your firm for a buyer; superficial measures would be easily spotted during due diligence by his or her adviser. Not all businesses require extensive grooming. Those that do will find it to be a time-consuming process, but it can make a massive difference to your chances of making a sale and the price you eventually negotiate. The best single piece of advice to give a vendor – and one suggested by almost every major adviser – is to continue running your business as if you were keeping control of it for the long-term. You should never make changes that look as if they are being made simply to facilitate selling the business. The buyer will be looking at four aspects of your business: the accounts, your strategy, the management and staff, and the legal and contractual arrangements you have with suppliers and clients. You can groom each area to make your business look more attractive to potential buyers. Accounts During the sale process – which can last upwards of six months, if not much longer – you will need to ensure that key indicators of the business remain attractive to buyers. So firstly, do focus on keeping sales, profits and margins in line with expectations and forecast growth. There is no substitute for having robust, evidence-based predictions and budgets; but some buyers will expect you to back those figures with some sort of guarantee or earn-out clause – meaning you either stay on after the sale to ensure the targets are met or payment of part of the price is conditional on the achievement of those targets. However, there are some other, rather simpler measures you can take (or ask your accountant to take) to ensure that the company’s books look more attractive to buyers. Private companies tend to gear their accounts towards minimising their tax burden. It might be worth considering re-jigging them to emphasise earnings. This is, after all, how listed companies work, so it is particularly important if you believe you can attract public companies. Also, try to identify exceptional items in your accounts – such as relocation costs, expenditure associated with a one-off termination of a contract, or capital investment. These can be isolated by the day-to-day operational costs to give a far fairer picture of the long-term profitability of your business – producing a far higher price tag in the mind of the potential buyer. Strategy Polishing and communicating your ‘vision’ for the business is perhaps the most difficult part of the grooming process. It is essential that you are convinced by your own strategy; if you are not, neither will your buyer. Make sure you talk to your management and staff when drawing up both projected profits and your plans for the future. It is also worth thinking about how you can cut costs – without damaging the bottom line. Profits need to be managed so that the business is sold at the point at which it looks most promising and secure. It needs to be a finely-tuned engine, not the remains of an old banger that has been stripped for parts. More mundane operational issues need to be considered. Is your IT system up to date? Are you files and company records as contemporary and well-organised as possible? Is your management structure logical? Human resources For many businesses in service-orientated Britain, employees – together with brand and customer and client relationships – are their most valuable assets. If the owner has a crucial involvement in the everyday running of a business a buyer might ask him or her to stay on, to ensure a smooth handover and continued profitability. So if you’re looking for a clean break from your working life, it is essential that you have a capable and motivated management team in place – and one that will remain just as devoted to the business when it is in different hands. Well before making the first concrete moves to sell your business, you must begin putting in place a capable management team that proves your participation is not essential to the success of the company. Getting staff on long-term incentive schemes will help ensure that their commitment to the company endures beyond the point it changes hands. The extent to which this is important will depend on the nature of the business. If its success is dependent on proprietary techniques, or other forms of intellectual property – or skilled manual staff and assets in the case of a manufacturing company – then such matters can be less important. Unless, of course, the company’s supply and demand channels, and the prices they achieve there, are dependent on the management’s personal relationships – a factor that buyers will be particularly attuned to, and one you should aim to eliminate. Legal issues Legal housekeeping is essential, and should be conducted before you begin any sale process. It is a key part of due diligence, but an area in which many private vendors regularly come unstuck. It’s absolutely vital to ensure that all your contracts – not just with suppliers, customers and employees, but also your property lease or deeds – are completely in order and watertight. If you do not have your own standard terms and conditions, you will be liable to the terms of the other party, so you should ask a lawyer to draw up a standard document. It is also important to check that all your tax affairs are up to date, and that all titles to assets are watertight. Many buyers will insert clauses making you liable for any unforeseen costs that arise after the sale. The law firm Pitmans points out several other areas that buyers often ignore. In private companies, the statutory books – which list the shareholders and debentures – can be neglected, and this can potentially give rise to damaging conflicts after the sale process has concluded. Also, it recommends conducting a full health and safety audit of your premises. Finally, intellectual property has become more important in recent years. You must ensure that any proprietary knowledge is secure and transferable to the new owners. This means clarifying that patents, trademarks and domain names are all registered with the proper authorities. Many areas of your business will need attention – but you might not necessarily be the best person to discern what these areas are. A qualified and well-informed adviser will often be more objective in assessing the areas in which the business could improve before the sale process is triggered. | 
