.png)
When selling your company, it's important that you budget for any associated costs, such as marketing, broker fees and even the time it takes for you to work through the business sale process. Our guide takes you through what to budget for during this exciting yet challenging time.
The Cost of Marketing Your Business Sale
Marketing your business effectively is one of the steps that requires careful planning. Simply listing your business online is usually not enough - a well-rounded marketing strategy is needed to attract serious buyers. This includes creating marketing materials, and paying for online advertising.
If you are using a business broker service, they will create a compelling sales memorandum for you, but if your business is small you may want to use a copywriting service to do this for you instead. We provide this service at KBS.
Business brokers will usually cover the cost of ads in their fees, but if you opt to go it alone, you can expect to pay around £50 per month to list your business sale on each site you decide to advertise on.
Business Broker Fees
Marketing your business on your own can be a false economy as you are likely to receive a lower valuation, make mistakes and have to deal with timewasters - and when you're running a business, time is definitely money!
Business sales brokers generally charge an upfront fee to cover marketing costs, and a commission of 5% to 15% of the final sale price. Experienced business brokers will also have a database of vetted buyers, which can significantly speed up the sale process.
A professional business broker will produce your sales memorandum, value your business, guide you on reasonable terms for the sale, and ensure you are aware of your legal obligations.
If Property is Involved in the Business Sale
When a business is put up for a sale and a property is included, an Energy Performance Certificate (EPC) may be required should the property not be owned by the Limited Company being sold. An EPC provides a buyer with details about a property’s energy efficiency and likely carbon dioxide (CO2) emissions. An EPC applies only to business properties which have ‘their own heating or conditioning units’.​ The cost of an EPC certificate can be up to £120.
Â
In addition, if there is a risk of harmful materials being present, such as asbestos, the seller will have to pay for inspections to ensure the environment is safe. The costs of this will vary according to the size of the property and how hazardous the environment might be.
Due Diligence Preparation
Once you have interested buyers, they will begin a due diligence process—an in-depth examination of your financials, assets, and operations. It's wise to get all your accountancy records, client contracts and financial commitments organised as soon as possible for review, as this will also help to lower the costs of hiring professionals.
Usually, the buyer will incur most of the cost of hiring professionals for due diligence, but it's important to budget for accountancy costs nonetheless, as well as the costs of employees undertaking this work instead of their normal duties.
Legal Fees When Selling A Business
When you are selling a business, it is essential that you hire a lawyer with M&A experience. Your solicitor will help negotiate the business sale contract that will cover the terms of the exit, such as valuation, handover period, and non-compete clauses. They will ensure you complete your legal obligations, including to your employees. Solicitors specialising in this area will either charge an hourly rate or a fee of 1-2% of the sale price.
Employee Severance Packages:Â
If downsizing is part of the transition, you may need to offer severance packages. An average severance package can cost from two weeks to several months of base pay per employee.
Tax Advice When Selling Your Business
Understanding the tax implications of selling your business is vital before finalizing any agreements. Some entrepreneurs in the UK qualify for BADR but this is being nearly phased out after the Rachel Reeve's budget so time is of the essence if you do qualify and want to sell soon. Read our guide to the tax rises affecting business sales to find out more.
Along with helping you prepare for due diligence, a good accountant will help you minimise your tax burden - which could involve re-investing some of the sale proceeds or even becoming an ex-pat for a time. Specialist tax advice is essential if you will receive a significant gain.
Professional Guidance Can Be Invaluable
Selling a business can feel like navigating a maze, but professionals can make the process easier. Working with professional business sale brokers can streamline the process so you can continue to run your business effectively. The best business brokers will even give you advice on how to make your company even more attractive, helping you achieve a much higher valuation.
The Benefits of Professional Help:
Expert Insight: Brokers understand current market trends and have negotiation experience. Their input can significantly affect the sale price, helping you to secure the best possible outcome.
Cost-Effective Solutions: Although there's a fee for hiring a broker, the higher sale price they usually negotiate can lead to a better return on investment.
Being aware of the costs associated with selling your business is critical for preserving your profits and ensuring a smooth transition. The more prepared you are, and the more help you get, the smoother the process will be!
If you would like to find out more about KBS' business brokers, or would like a free business valuation, find out more using the links below.
Comments