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Ask yourself tough questions if selling your business

Keith Furniss

Keith Furniss
  • 'Sell and grow’ means that you sell the business, or more likely part of it, and continue to run it for a time before exiting entirely.
  • ‘Sell and go' means that you sell the business and leave immediately, but are still subject to an earn-out. 

There will always be an earn-out involved, irrespective of which way you go – negotiate this very carefully.

A final warning: do not be tempted to think that you can sell the business and then poach the clients back. Buyers nowadays will pursue you with vigour if you poach, irrespective of whether the clients approach you or vice versa, and ‘no poaching’ clauses can last for up to five years.

Typical buyers are: consolidators, private equity or just a trade buyer. 

Internal buyer

This route will be chosen when you want to leave the business to existing non-shareholder members in your team.

The new shareholders will almost certainly need to borrow money to finance the deal and will need to provide some sort of security. Beware, not everyone is prepared to take the risk involved or a temporary drop in earnings which this may mean, although they will inevitably want a share in the upside. 

There are lenders out in the market who are willing to fund deals like this, although clearly there are constraints to consider. This route will normally involve a phased exit from the business for sellers.

In conclusion, the starting point is to be clear what it is you are trying to achieve, follow a structured approach and give yourself enough time to ensure a good outcome for yourself.

Keith Furniss is head of sales at Novia