In our latest guest blog post, Keith Tully from business recovery specialists Begbies Traynor looks at the issues around selling your business during the pandemic and explores the options for owners of distressed businesses.
As the coronavirus pandemic leaves its mark on every sector, disrupting the natural flow of consumer spending and hampering the performance of the economy, key trading seasons have been eliminated to the financial detriment of business owners across the country.
As we emerge from a second national lockdown, and with possible further lockdowns early in 2021 not being ruled out, non-essential businesses still recovering from the adverse impact of the first lockdown are again having to recalibrate and rebuild.
For others there will be no realistic view of recovery and they will be left exploring company liquidation options, or an alternative route.
If your business is on the brink of collapse due to long-term underlying issues, eliminating the prospects of survival, company liquidation may be unavoidable. If your business has adequate asset value, selling your business may be an appropriate alternative.
Selling a profitable or distressed business
The path you take to sell your business will ultimately be determined by the financial health of your company, your expectations and future goals. If your business is distressed and you wish to facilitate a cost-efficient exit, you may consider selling the profitable parts of your business to attract prospective buyers disinterested in undertaking a loss-making exercise.
On the other hand, entire marketplaces are consisting of business recovery specialists with the required resources, connections and financial support to conduct business restructuring.
If your business is a profitable entity with a strong track record and you have reached the natural end of your ownership, you may consider selling your company to a buyer with the necessary means to shelter the business during the Covid-19 storm. Securing a buyer within good time can preserve the financial health of your business and protect it from a slow demise.
Conduct a business valuation
If you are straddling between company liquidation or selling up, conducting a business valuation can determine how much your business is worth. Taking into consideration assets and liabilities, this will indicate if the business has enough cash to maintain liabilities and fulfil financial commitments. In addition to company assets and liabilities, the company valuation will take into consideration expansion opportunities, business potential, recurring income, overheads and more.
By establishing the value of your company through a business valuation, you can arrive at an asking price which is an accurate reflection of market value. Valuing your business can bring clarity to your future plan, help you target the right calibre of prospective buyers, and determine a price tag for your company.
Enlisting specialist support
If you are new to the process of business transfer and would like support from an industry specialist, you may decide to enlist a business transfer agent specialising in your sector. A competitive agent will typically conduct the valuation as part of the overall service and simultaneously advertise your business to thousands of prospective buyers. The due diligence process and sale negotiations will typically be supported by the transfer agents, sparing you time and effort.
Due diligence checklist
The due diligence process is for the protection of both parties, so it is important to communicate transparently with prospective buyers and collate the necessary reports to back up your claims. From a legal protection point of view, abiding by the correct guidelines, such as being registered or gaining the necessary accreditations is vital. Disclosing vital information once a buyer shows genuine interest and negotiates a price point is mandatory.
Preparing your business for the sale process will vary for each business owner, depending on your end goal, however, seeking specialist support can help you maximise your chances of sourcing a suitable and proceedable buyer. As an alternative to company liquidation, this process can help pay off your life’s work and continue the legacy of your company under different ownership.