Monday, 8 April 2013

How To Sell A Business And Get Up To 40% Extra Cash In Your Pocket

Being the Senior Valuer here at Axis, I am normally the first point of call for clients considering selling their businesses, and therefore first in line to answer a whole raft of questions relating to how to sell a business and the business sales and marketing process.

Selling businesses can realistically be a very straightforward process, and when the two parties involved are in agreement, it can be quick, pain-free and completed with very little stress for either party. Being realistic though, this is not normally the case, with buyers playing on the naivety of a seller. This is why vendors will often call in the help and guidance of business brokers such as Axis to take the stress and hassle out of selling a company. This then allows them to carry on with the day to day tasks of being a business owner, a point which is often forgotten, and can be hugely detrimental to a company’s future for both the seller and the buyer.

Part of our service offered to clients, which is often grossly overlooked by Vendors when selling a business off their own backs, is to look at the bigger picture. Not only should consider the obvious details when negotiating a sale, like “how much are they going to pay me for my business, and when”, but a main point which is regularly overlooked is the Vendor’s Tax standpoint, and their Asset or Balance sheet value.

The buzz words here for people to consider are “Entrepreneurial Tax Relief”. In layman’s terms for people like myself  it basically means that if you have owned a trading company for more than 12 months, then you potentially only have to pay 10% Tax on up to £10m of your lifetime gains through company disposal (I always suggest seeking professional Tax Advice).

This is an example of how a simple piece of advice and professional brokering from someone like Axis can make you that huge potential gain in your overall return on your life’s work. It is not only the “Goodwill” value that benefits from this tax relief, but also potentially your Balance Sheet / Assets. Let me give you an example of how Axis managed to help a client realise a higher return from their company disposal:

We had been brokering a sale for a client in the recruitment sector recently that had a “Goodwill” value of circa £1 million, but also had Cash and Assets within the company of around £1 million. The client’s first instinct was to draw down this cash; as they quite rightly stated, “It was my cash”. This is something hundreds of company owners are saying and doing all around the country as we speak but unknowingly to their huge loss. Our Senior Broker who handled the sale quickly stated that this was not the best course of action to take at present, as Axis often has great success in selling this cash for its clients. If this is achievable, then the Tax saving for the client is potentially huge. Ultimately, if we could not sell the cash then, quite rightly, it was yours to “Draw Down”. Luckily for our client, the purchaser was happy to work with them as part of the negotiating process and helped them secure their hard earned money at this far more advantageous Tax rate, and in this case, securing them nearly an extra £200,000 worth of cash! This money would originally have been written off through having both no prior knowledge of this Tax break, and no professional advice.

Summing up then, most business owners out there are perfectly capable of finding out how to sell a business and doing it themselves, and require no help at any stage of the process. But for the majority of Vendors out in the market that are considering this process, asking for a little help is not a bad thing. Is it? And it could be potentially the best business decision they will ever make. Axis will always act with our clients best interests and if offering advice such as turning your Partnership or Sole Trader into a Limited Company or LLP would enable the client to achieve better sale value, then this is something we will do, as ultimately the more money we secure for our client, the more money Axis earn...even if it takes us more than a year to earn it!

Ian Charlesworth, Senior Valuer

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