How to prepare a business for sale: a guide for founders

01

Why preparation matters more than timing

Founders often ask when the best time to sell is. It is a fair question, and markets do move. But timing is mostly out of your hands. How ready the business is when the moment comes is not.

The British Business Bank puts it plainly in its guide to selling your business: preparing your business for sale gives you the best possible chance of getting a higher price, and that preparation includes planning the right exit route beforehand. It also notes that now may not be the best time to sell, and that holding off until certain issues are remedied can bring a more reasonable valuation.

Timing is mostly out of your hands. Readiness is not.

Preparation works in both directions. It raises the chance of a good outcome if you sell, and it leaves you with a stronger, calmer business if you decide not to. Very little of the work described here is wasted, whatever you decide.

The rest of this guide follows the order that tends to work best: your own goals first, then the business through a buyer’s eyes, then the records, people and structures a buyer will test.

02

Start with what you want: your number, your timing, your role afterwards

Every good exit plan starts with the founder, not the business. In SCALE2SELL® we call this Founder Worth: what the business gives you today, and what you need it to give you when you leave.

In the British Business Bank’s Top tips: how I exited my business, the founder Lucy Hackshaw starts with why: focus on why you want to exit and why now, because the process is uncomfortable and your reasons will keep you steady. She also says to know your walk-away number and to be realistic about it. Before you look at anything else, answer these questions in writing:

• Why now? Retirement, a new venture, health, a change in the market or simply time for someone else. Buyers will ask, so be clear with yourself first.
• What is your walk-away number? The figure below which you would rather keep the business. Base it on what you need the proceeds to fund, not on a rule of thumb.
• How involved do you want to be afterwards? A clean break, a handover period, a continuing stake or a board seat all point to different routes.
• Who should own it next? A trade buyer, investors, your management team, your employees or your family.
• What will you do next? The same British Business Bank piece suggests planning your own transition while you exit, not after it.

Write the answers down and date them. They will change as you learn more, but they give every later decision a reference point. Our guide How to write an exit plan turns them into a one-page plan.

SCALE2SELL® pillar 01Vision & Value

03

Look at the business the way a buyer will

Founders see the history, the effort and the potential. A buyer sees evidence, and the gaps in it. The British Business Bank lists the evidence that can make selling a business easier:

• increasing profits
• increasing turnover
• strong cash flows
• a wide and growing customer base
• good visibility on forward contracts.

It also explains how acquirers typically put a price on a company: by a multiple of normalised earnings, or by discounting future cash flows, and both calculations depend on assumptions and projections. In other words, a buyer is paying today for profits they expect tomorrow. The more confident they are in those profits, the more they can justify paying. Our guide What makes a business worth more? looks at the drivers of that confidence in detail.

A simple exercise

Imagine a buyer has two hours with your management accounts, your customer list and your key contracts. Write down the five questions they would ask first. Then note how confidently you could answer each one today, with documents rather than reassurance. The weakest answers are your preparation priorities.

04

Get your financial story straight

Clear, consistent numbers make every later conversation easier, and weak ones slow everything down. Start with the basics that GOV.UK sets out for company and accounting records: a limited company must keep records about the company itself, such as its shareholders, resolutions and any loans secured against its assets, as well as full accounting records. They need to be complete before a buyer’s accountants ever see them.

• Monthly management accounts, produced on time and reconciled to the bank. If they currently take weeks to appear, fix that first.
• Statutory filings up to date at Companies House and HMRC, with nothing overdue.
• A clear line between personal and company spending. GOV.UK is explicit that a company’s finances must be kept separate from those of its owners and directors.
• Normalised earnings you can explain. Buyers look at profit adjusted for one-off costs and for anything unusual, such as how the owners are paid. Work with your accountant to show which adjustments are fair and how each one is evidenced.
• Forecasts you can defend, built on the same assumptions you use to run the business.

None of this replaces your accountant. It makes their work, and a buyer’s, faster and cleaner.

05

Reduce reliance on you and on any single customer

Two issues deserve early attention because the British Business Bank names both. Its list of reasons an exit may not be viable begins with a business that relies on you, as owner, or on a single customer.

Owner dependency shows up in decisions, relationships, know-how and sales. If the business cannot run for a month without you, a buyer will either reflect that in the price or ask you to stay on for longer than you would like. Our guide How to make your business less dependent on you sets out a practical way to reduce it.

Customer concentration is the same risk seen from the other side. If one or two customers account for a large share of revenue, the buyer inherits the possibility of losing them. Measure it, watch the trend and widen the base deliberately; our guide to customer concentration risk shows how to measure it in your own numbers.

A buyer pays for what continues after you leave.

The founder’s account on the British Business Bank adds a useful discipline: develop your successor before you trigger your exit, and expose them to your role. It helps them feel ready to step up, and it shows a buyer that you are not irreplaceable.

06

Put your legal and commercial house in order

Contracts, ownership and compliance are rarely urgent until someone asks to see them. In a sale, someone always does. The aim at this stage is to find the gaps early, while fixing them is quiet and cheap. The points below are general; your solicitor should review your own position.

• Key contracts. Customer, supplier, lease and finance agreements should be written, signed, current and easy to find. Some contracts contain terms that apply if the company changes hands, so ask your solicitor to check the important ones.
• Intellectual property. GOV.UK’s overview of intellectual property explains that you own IP if you created it, bought the rights, or have a brand that could be a trade mark, and that IP can have more than one owner. Check that the company, rather than a founder, an agency or a contractor, owns the names, designs, software and content it relies on.
• Employment. GOV.UK notes that all employees have an employment contract, whether or not it is written down. Make sure written terms exist and reflect how people actually work.
• Company records. Keep your register of people with significant control accurate, along with your statutory registers and Companies House filings.
• Data protection. If you hold personal information about staff or customers, GOV.UK’s guide to data protection and your business is the place to start.

Employees deserve particular care. When a business changes owner, its employees may be protected under the TUPE regulations, which means that on some kinds of sale their jobs and terms transfer to the new owner. GOV.UK’s guide to business transfers, takeovers and TUPE and Acas explain when it applies.

When a buyer arrives, all of this is tested in due diligence. Our guide Due diligence: what a buyer will check sets out what is usually examined, with a checklist.

07

Choose your exit route early

The route you take shapes almost everything else: who will examine the business, what they will value, how long it takes and what your role is afterwards. The British Business Bank lists several routes, including:

• a trade sale to another business
• a full or partial sale to private equity investors
• a sale to a family office or a high net worth individual
• a flotation on the stock market
• refinancing
• an employee ownership trust
• a joint venture, which can lead to other routes.

Management buyouts and family succession sit alongside these. Each route rewards different strengths. A trade buyer may value strategic fit; an investor, growth potential and a strong management team. A management buyout depends on a team willing to own the business and the funding to do it.

The founder’s advice on the British Business Bank is to design several exit strategies, pick one and commit to it, because clarity helps when the process gets complicated. Our guide Exit routes explained compares the main options side by side.

08

Build your team of advisers before you need them

A sale is a team effort, and the team is best assembled before anything is triggered. For her own exit, Lucy Hackshaw used an accountant for the valuation, a corporate adviser for strategic support through the negotiation, an executive coach as a sounding board and a lawyer for legal support. Your own team will probably look similar:

• An accountant who knows your business, with access to due diligence specialists. ICAEW describes transaction services as carrying out financial, tax, vendor, commercial and operational due diligence, and its find a chartered accountant directory lists member firms.
• A tax adviser, involved early (see below).
• A solicitor with transaction experience.
• Transaction advisers where your route needs them, appointed on clear terms.
• Someone on your side of the table who has been through it: a sounding board for the decisions only a founder can make.

That last role is where Stratworth fits. We help founders prepare the business and themselves, and we work alongside your professional advisers. We do not arrange sales, find buyers or produce formal valuations.

09

Take tax advice early

Tax can shape which route makes sense, how a deal is structured and what you keep. Rates and reliefs change, and whether a relief applies depends on detailed conditions and on timing. That is why this guide states no figures, and why the most useful single step is to speak to your tax adviser early, well before any terms are agreed.

10

Keep it confidential

News that an owner is thinking of selling travels fast, and rarely helpfully. The founder’s account on the British Business Bank is direct about it: the more people who know you are considering an exit, the greater the risk of the news reaching clients, and a leak can harm your focus, the company’s reputation and your negotiating position.

• Keep a short, written list of who knows, and why.
• Use a confidentiality agreement before sharing detailed information with any outside party. Your solicitor can provide one.
• Prepare what you would say to staff, customers and suppliers if the news got out.
• Plan when and how you will tell your team. The British Business Bank notes that you should tell staff about a sale, and where TUPE applies there are duties to consult. Take advice on the timing.

Discretion is another reason to prepare early. A business that is ready needs fewer people involved, for less time.

11

A preparation plan you can start this quarter

Preparation does not need a grand launch. Twelve focused actions over the next three months will tell you where you stand and what to fix first. Tick them off as you go.

12

How Stratworth helps founders prepare

SCALE2SELL®, our exit readiness framework, turns this preparation into a structured programme. It looks at the business across eight pillars, from your own vision and the strategy to the numbers, systems, team, customers, market position and the exit itself. Each pillar is scored from 1 to 5, progress is tracked on a quarterly readiness dashboard, and each has a toolkit of practical worksheets and scorecards, released through a secure Stratworth Vault over the first six months.

It is delivered founder to founder. Stratworth Advisory is led by Nik Spencer, who brings 34 years of founder experience and 3 successful business exits. Our role is preparation and strategic guidance: we help you get the business, and yourself, ready, and we work alongside the professionals who advise on the transaction. Read more about exit planning with Stratworth.

The simplest first step is to score your business with the free Readiness Assessment, then book a complimentary Founder Conversation with Nik to talk through what it shows.