Karen Edwards is an associate in Frettens’ Corporate & Commercial Team.

She was recently listed as one of the region’s ‘Rising stars’ in the Legal 500.

Here, Karen answers your questions on selling a business.

What are the key stages in selling a business?

While every business sale is different, there are three main parts to the process.

1. Preparation
2. Structuring the deal
3. The legal process

I wrote an introductory guide to selling a business recently. In that guide, I explain in more detail what is involved in each of the three stages.

What advice would you give to someone considering selling a business?

Selling a business is often the culmination of many years of hard work nurturing and growing that business.

Plan well and prepare the business for sale. Pick the right time to exit by considering the market and ensuring you will have the time to devote to the process. Choose a solicitor who specialises in business sales so that you get the right advice.

How can you prepare a business for sale?

Building a business into a successful enterprise is often the culmination of years of hard work, so when it comes to the time to sell, you want to be sure that the business is an attractive prospect for any buyer to allow you to realise the maximum value.

There are several key things that you should do to groom your business for sale, including getting our accounts in order, showing a stable financial pattern, getting buy in from key staff and ensuring your business is compliant with all legal issues.

The key is making sure you are able to present your assets well. In short, you need to get your ducks in a row. Earlier planning will pay off by making the process of selling less stressful and ultimately allowing you to gain the best possible price for your business.

What about selling to a family member?

If your exit is based on a family succession:

• Talk openly with possible successors, in a professional environment.
• There may be only one realistic candidate, but you still need to be sure this person has the necessary skills and commitment; allow them to work in your business or encourage them to work in a similar business elsewhere.
• If more than one person is taking over the business, make sure they have similar ideas and accept the part they will play in the overall responsibility of the business.
• Keep other employees fully informed and in particular, inform key staff about key decisions.
• Discuss your future expectations with your successor as this should make it easier to step back when you retire.

My colleague Matt Fretten worked on recent transfer of ownership to family members that you can read about here.

How can you best prepare for a management buyout?

If a management buyout is the preferred option, there are some things a seller can do to make this a more viable option:

• Train your management team; their skills will be a key issue for any banks who are approached to fund the deal.
• Give the management team time to raise the money.
• Talk to them about how you might structure any deal and consider allowing them to acquire the business in stages, for example by buying part of it each year for a number of years out of their share of the profits (this way you continue to take your own share of the profits until the deal is complete). If you agree to this structure, make sure the sale agreement commits the buyer(s) to buy the whole business so that your exit takes full effect.

My colleague Wayne Spolander has written in detail about the management buyout process in an article you can read here.