I’m thinking of selling my business.

Selling your business and retiring to a sunny beach is the dream for many owners.

But time and time again, I see business owners make the same avoidable mistakes when it comes to the sale.

If you’re thinking about selling your business in the next few years, here are 6 key traps to steer clear of:

Leaving tax planning too late

Most owners wait until they have a buyer lined up before thinking about tax, and by then, it’s too late for many of the best strategies.

Once a Heads of Terms or similar agreement is signed, your options shrink dramatically.

You may no longer be able to:
– Transfer shares to a family trust tax-efficiently
– Gift shares to charity to reduce your tax bill
– Make use of longer-term planning around Business Asset Disposal Relief (formerly Entrepreneurs’ Relief)

Smart tax planning needs to happen years in advance. If you wait until you’re in the middle of negotiations, you’ve missed a lot of opportunities.

Jumping at the first offer

It’s exciting when someone shows serious interest, but the first offer is rarely the best one.

I’ve seen business owners accept early offers without realising that, with another year or two of growth, the value could have been significantly higher.

If the business is on a good trajectory, it may be worth holding out. You only sell once, so get it right.

Selling to the wrong buyer

It’s not always about the headline number.

Plenty of owners sell part of their business to a buyer, stay on to help run it, and end up miserable. Culture clashes, different values, too much interference, you name it.

Even if you’re doing a full exit, who you sell to still matters. Will they look after your staff? Will your legacy be protected?

Don’t just chase the biggest cheque. Choose the right fit.

Trying to do it all yourself

Selling a business is one of the biggest financial events of your life. You need a team around you, accountant, lawyer, financial planner – who know how to do this well.

The buyer will almost certainly have professionals on their side. If you don’t, you’re likely to be out-negotiated, and your sale price could take a hit.

One client thought their business was worth £60m, but poor financials meant the offers were coming in closer to £25m. After getting the right team in place and tidying up the numbers, they sold for £55m within a year.

Moral of the story: Don’t wing it. Get good advice early.

Running too many personal expenses through the business

Putting personal costs through the company might reduce your Corporation Tax bill short term, but it can backfire when it’s time to sell.

Lower profit = lower business valuation.

Buyers look at your accounts to decide what your business is worth. If those numbers are messy or artificially low, you’ll get less.

A few years before selling, clean up your books. Make the profit look as strong as possible. It’ll pay off in the final price.

Not thinking about how the sale is structured

In the UK, how a deal is structured affects both how much you get and how much tax you pay.

~Will it be a share sale or an asset sale?
~Will you be paid in full upfront or through instalments?
~Are you staying on as part of the deal or walking away?

One seller I know agreed to keep 40% of their shares in the new company as part of the deal. That business folded within two years – and they lost nearly £10m.

It’s easy to focus on the big number, but it’s the details that make or break a deal.

Final Thought:

These are the six biggest mistakes I see when business owners go to sell.

If you’re even thinking about selling in the next few years, get ahead of these now. A bit of forward planning can mean a much bigger payday – and a smoother ride to that well-earned retirement.