Preparing your business for a sale

Selling your business is one of those big ‘Life Events’ and you will need to do a fair bit of groundwork beforehand to ensure the process is as smooth as possible and that you obtain maximum value when you do come to sell.

You will have lots of questions that need answering;

  • How much is my business worth?
  • Who will want to buy it?
  • What’s the best way to sell it?
  • Where will I find a buyer?
  • What’s the process?
  • What are the pitfalls?
  • How much will it cost?

You will invariably need expert help in navigating your way through what can be a protracted process from a legal, financial and operational point of view.

But, first things first; your franchise agreement will almost certainly include a clause requiring that you notify the Franchisor that you want to sell your business. You might also be required to give the Franchisor the right of first refusal, so do check for any relevant clauses in your agreement early in the process.

How much is my business worth?

Putting a value on your business can be a difficult exercise for a franchisee, you are, understandably, quite likely to be emotionally tied to your business and will invariably not be as objective as an independent valuer. It’s also worth bearing in mind that a business is only worth what someone is prepared to pay for it so realistic expectations are important. That’s not to say you shouldn’t strive to get the best possible price when you do sell, after all you have worked hard to build and develop it into the success it is today.

There are a considerable number of factors to consider when trying to arrive at a realistic selling price for a business; firstly, what type of sale?

An Asset Sale involves the purchase of some, or all of the assets, which can be tangible or intangible, that are owned by a company – but not the company itself; the franchisee retains ownership of that.

A Share Sale only applies to Limited Companies and is where the entire company is sold, assets and liabilities. The buyer acquires the company through the purchase of shares from the current owner or owners.

There are pros and cons and tax implications for each sale type so you really must obtain proper professional advice before deciding. Whilst not an exhaustive list some other factors to consider are:

  • Actual assets
  • Turnover
  • Profit
  • Reason for sale
  • Costs
  • Marketplace
  • Employees
  • On going support available
  • Franchise Terms

Share this post