According to Bob Hollis, managing director of Hollis Gore, a company that specialises in preparing companies for sale, it takes about six months to get a company in tip-top condition and ready for sale.
This means advisers looking to sell up should start preparing their company now.
So what should they do? Hollis explains that tying up loose ends and making a business straightforward is essential.
“When looking to appeal to potential sellers, owners need to ensure that their business is simple and completely transparent,” he says.
Hollis provides five ways in which owners can get the best price for their business:
1) Make informal relationships formal
Ensure that contracts are drawn up around any informal relationships. These might be referral relationships with accountants or solicitors. If the referral relationship is based on friendship, an owner leaving can mean work dries up. Buyers will want to know they will have a continued supply of work in this way. Where official contracts with suppliers have expired they need to be reinstated.
2) Tidy up staff contracts
Similarly staff contracts need to be formalised, job descriptions must be brought up to date to account for new responsibilities or promotions. New owners that don’t know the staff personally will want to know who to approach when they need a job done.
3) Sort out grievances or disputes
Historical issues such as staff grievances or disputes must be dealt with and finalised, even if this costs money. Issues like these make a small company unattractive to owners.
4) Focus on succession planning
Buyers will be keen to know that directors, where they are going to stay on, have signed service agreements in which they have committed to remain with the company in the short term. Losing the sort of business knowledge held by the directors of a company can cause irreparable damage.
One area that is particularly important for IFAs is ‘succession planning’ where an owner, who might have built a business up around his own name, must ensure that he is effectively replaced. “An owner that works a day a week is easily replaced, an owner that works six days a week is not,” says Hollis.
5) Put financial agreements in order
Similarly financial agreements will need to be tidied up. The company should look to pay loans off where possible, or clear bank debenture’s where they can. A bank debenture remains on a company’s books once a loan has been paid off until the company writes and requests that it is removed.