Selling Your Business

Deciding to stop doing business does not necessarily mean the end of a business activity. Transferring ownership of a company will preserve its achievements in terms of market presence, skills and jobs.

About 450 000 firms are transferred every year in Europe. It is estimated that one-third of these firms, representing 600 000 jobs, may be lost every year. It is also estimated that one-third of European business owners - with some 690 000 businesses, providing 2.8 million jobs, will retire in the coming years.

There is a risk that many of these thriving firms will not be taken over - unless the owners make proper preparations for their retirement and overcome the difficulties involved in transferring ownership.

Preparing for a transfer is a particularly complex process. Owners very often have neither the knowledge nor the experience to deal with the complex legislation, taxation and administrative formalities it involves. Many also face a psychological barrier to handing over their company.

To improve conditions for transfers of ownership, the European Commission has recommended various measures to the authorities in EU countries. In its Communication "A review of the Small Business Act", the Commission asked EU countries to:

  • Develop user-friendly and widely supported marketplaces and databases for transferable businesses;
  • Provide training and support to increase the number of successful business transfers, including communication campaigns to raise awareness of the need for early preparation of business transfers.

When you start planning to sell your business there are a number of key points to keep in mind. Remember you will only get a single chance to do it successfully.

  • Get the help of an experienced professional to help you through the process, with negotiating price and terms and to avoid any legal, ethical or financial pitfalls.
  • Determine a realistic price taking into consideration the market and the condition of your business.
  • Plan a good marketing campaign to target the right buyers to get best price possible. Promote your opportunity widely through print, online media and direct mail.
  • Keep matters confidential so as not to alert your employees, suppliers or customers as this may destabilize the business.
  • Pay attention to any legal and tax implications. Rope in your accountant and lawyer to help you.
  • Don’t give up if the process takes time. There are a number of influencing factors such as price, type of business, finance and market conditions.
  • Prepare a detailed business profile detailing information on the products, industry, and your market. It should also give financial information about the business and the reasons why you are selling. A potential buyer will want to know. The buyer will also ask for historical information on the business. Present these in a simple format that puts your company in a positive light. Remember that a potential buyer will make his own research, therefore be truthful in the information you provide. If there are problems, present them together with possible solutions.

After you have decided that your business is good enough to sell you have to determine how much it’s worth. There are 3 components that should be considered when deciding on a price.

  • Plant
  • Stock
  • Goodwill

You will need the help of your accountant to get the full picture.

Remember that you have responsibilities towards your employees and creditors, as well as liabilities if you have financial obligations. A potential buyer will ask you to provide them with tangible reassurance about what they've bought and protection against future liabilities in the shape of warranties and indemnities. Before you agree on any warranties and indemnities you should always consult you advisers.

Warranties provide legal confirmation that certain facts relating to the sale of the business are accurate. For example, you might have to guarantee that financial information you have shown to the buyer is accurate and that the assets you claim to own exist. The buyer may be able to claim against you if the information is later found to be incorrect.

Indemnities are promises to reimburse the buyer for any losses resulting from specified future events. For example, you may have to indemnify the buyer against any penalties​.

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