There is a lot to consider when buying or selling a business, and BizSmart Core Advisor Ian Priest covered this in his first webinar, here. If you haven’t already listened to it, it’s a good place to start.
With more than 33 years in the banking sector, Ian has a great deal of experience in this arena. In this follow-up webinar, he takes a closer look at buying and selling businesses.
If you’re buying or selling a business there are some important things to consider. As a seller, you need to know what buyers are looking for and how they could potentially buy your business. Both of these elements can have a major impact on what you end up with in terms of cash, and you need to understand all the options and be prepared.
When you’re selling a business, the terms you agree will to a greater or lesser degree involve risk to both buyer and seller. It’s a sliding scale and you both have to agree and understand where you are on that scale.
Shares or assets?
As a buyer, the best place to be is buying assets. This means that you pay a fixed price for certain assets and accept certain liabilities.
If you are buying shares you get the company and all its history. A VAT investigation three months after you purchase can look back over several years and the bill lands up with you!
As a seller, the best place to be is selling shares. If you’re selling shares you get the money for your shares and at present, this qualifies for Entrepreneurs relief so you only pay 10% tax (subject to qualifying criteria) and all liabilities pass to the buyer.
If you are selling assets you get a fixed price for certain assets and lose certain liabilities, but the downside is that the money ends up in the company and you still have to get it out. This has tax implications.
Do you have the right experience?
When it comes to buying or selling a business, it’s vital to look at whether you have the right experience.
If you want to buy a business, before you can even think about raising finance, the first question that needs to be answered is, “Have you got the skills knowledge, experience and track record to be able to run the business successfully?”
And if you want to sell a business, the first question you need to answer is, “Have I got a business I can sell?”
BizSmart aims to help SME and micro-business owners scale their businesses and create value through sound practical business support. We aim to give you insight and clarity and fire up your determination to succeed. You can access blogs like this and more besides through our free SmartRoom service here.