How to sell a business: preparing for a successful sale

Selling a business can be one of the biggest financial decisions a business owner makes.

Whether you have spent years building the company with a future sale in mind or an opportunity has presented itself sooner than expected, achieving the right outcome rarely comes down to finding a buyer alone.

Understanding how to sell a business successfully means looking at the transaction from several angles, including the value of the business, its financial performance, how attractive it is to potential buyers, the structure of the deal and the tax implications of a sale.

The earlier you begin preparing, the more opportunity you have to address potential issues and put yourself in a stronger negotiating position.

Start by understanding what you want from the sale

Before preparing information for potential buyers, it is important to establish what a successful sale actually looks like for you.

The highest headline valuation is not necessarily the best deal.

You may want to consider:

How much you would ideally like to receive from the sale
How much of the consideration you want at completion
Whether you would accept deferred payments or an earn-out
Whether you want to retain a shareholding in the business
How long you are prepared to remain involved after the sale
Whether protecting employees or the company brand is important to you
Your preferred timescale for completing the transaction

Having clear objectives from the outset can make it easier to assess offers and avoid making decisions based purely on headline numbers.

Preparing a business for sale

One of the most important parts of preparing a business for sale is looking at the company from a buyer’s perspective.

A potential buyer is likely to scrutinise the financial performance of the company, but they will also want to understand how sustainable that performance is once the current owners step away.

Preparing well in advance gives you the opportunity to strengthen those areas before the business goes to market.

Get your financial information in order

Reliable, up-to-date financial information gives buyers greater confidence in the business and can make the due diligence process considerably smoother.

You should be able to provide a clear picture of historic and current performance, supported by accurate management information.

This may include:

Statutory and management accounts
Profit and loss, balance sheet and cash flow information
Revenue and profitability by customer, product or service
Details of recurring and non-recurring income
Customer concentration
Working capital requirements
Existing borrowing and financial commitments
Financial forecasts and the assumptions behind them

If there are unusual or one-off costs affecting profitability, these should also be clearly documented.

Buyers will normally want to understand the underlying or maintainable earnings of the business, so any adjustments should be reasonable and supported by evidence.

Understand what your business is worth

Establishing a realistic business valuation is another important step.

There is no single formula that applies to every company. Depending on the nature of the business, its value may be assessed using maintainable earnings, EBITDA multiples, future cash flows, comparable transactions, assets or a combination of approaches.

Factors such as the following can all influence value:

Profitability and margins
Historic growth
Forecast performance
Recurring revenue
Customer concentration
Intellectual property
Market position
Management strength
Reliance on individual owners or employees
Future investment requirements

It is also important to understand the difference between the value of the underlying business and the amount shareholders ultimately receive.

Adjustments for cash, debt, working capital and other liabilities are typically made, and will almost certainly be required, to arrive at the final equity value.

Reduce reliance on the owner

A business that depends heavily on its owner can represent a greater risk to a buyer.

If important customer relationships, operational knowledge and key decisions all sit with one person, a buyer may question how well the company will perform once that person leaves.

Where possible, preparing for a sale should therefore involve making the business more transferable.

This could include:

Building a strong management team
Delegating responsibility
Documenting key processes
Introducing senior employees to important customers and suppliers
Creating clear reporting and decision-making structures
Strengthening business continuity plans

Ideally, the business should be capable of continuing successfully without the existing owner being involved in every decision.

Review your contracts and business records

Potential buyers will usually carry out detailed legal and commercial due diligence.

Before they do, it is worth reviewing your own documentation and dealing with any obvious gaps.

This could include checking:

Customer and supplier agreements
Employment contracts
Shareholder agreements
Company records and Companies House filings
Property leases
Finance agreements
Insurance policies
Intellectual property ownership
Software and licensing agreements
Any existing or potential legal disputes

Particular attention should be given to change-of-control, assignment and termination clauses. A share sale may trigger change-of-control provisions, while an asset sale may require contracts to be assigned or novated with the consent of the other contracting party.

Decide how the business will be sold

For incorporated businesses, a transaction will commonly be structured as either a sale of shares by the existing shareholders or a sale of the business and selected assets by the company.

In a share sale, the buyer acquires the shares in the company and takes ownership of the existing legal entity, together with its assets, liabilities and ongoing obligations.

In an asset sale, the buyer acquires specifically agreed assets, contracts and liabilities, while ownership of the selling company remains with its existing shareholders.

The distinction can have significant legal, commercial and tax consequences.

Buyers and sellers can also have different preferences, so the proposed structure should be considered early and discussed with your corporate finance, tax and legal advisers before agreeing key terms.

Tax when selling a business

Understanding tax when selling a business is an important part of working out what you will actually receive from the transaction.

The tax position will depend on several factors, including your business structure, what is being sold and how the consideration is paid.

An individual selling shares in a limited company will generally be liable for Capital Gains Tax on any taxable gain, subject to available exemptions and reliefs. For the 2026/27 tax year, the main Capital Gains Tax rates for individuals are 18% and 24%, depending on the individual’s taxable income and the amount of the taxable gain.

Some business owners may qualify for Business Asset Disposal Relief. For qualifying disposals made on or after 6 April 2026, eligible gains are taxed at 18%, subject to the relevant conditions and a £1 million lifetime limit.

Where a company sells its business assets, the company may be liable for Corporation Tax on profits and chargeable gains arising from the sale. A further tax charge may arise when the proceeds are subsequently extracted from the company by its shareholders.

The precise outcome will depend on the transaction structure and individual circumstances, so tax planning should take place before the main terms of a sale are agreed.

Find the right buyer, not simply the first buyer

Once the business is ready for sale, the next stage is identifying potential buyers.

Depending on your objectives and the nature of the company, this could include:

A competitor or other trade buyer
An existing management team through a management buyout
A private equity investor
Another strategic investor
A targeted sale to selected potential purchasers

Creating competitive tension between credible buyers can help strengthen your negotiating position.

However, confidentiality also needs to be carefully managed, particularly where potential purchasers include competitors.

Information is often disclosed gradually, with interested parties signing confidentiality agreements before receiving more commercially sensitive information.

Look beyond the headline offer

Receiving an offer can feel like the end of the process, but there can still be significant negotiation ahead.

When comparing proposals, consider more than the headline valuation.

Look at:

Cash payable on completion
Deferred consideration
Earn-out conditions
Working capital adjustments
Debt adjustments
Buyer funding
Warranties and indemnities
Your responsibilities after completion
Any retained shareholding
Restrictions placed on you following the sale

A £5 million offer paid largely at completion could ultimately be more attractive than a £6 million offer where a significant proportion depends on uncertain future performance.

Keep running the business during the sale

Selling a company can be time-consuming and distracting.

However, allowing performance to fall during the sale process can weaken your negotiating position.

Buyers will continue to review management accounts, order books, customer relationships and forecasts throughout the transaction.

If performance begins to fall significantly below expectations, they may try to renegotiate the price or change the terms of the deal. Maintaining normal operations and keeping the management team focused can therefore be just as important as managing the transaction itself.

Plan the handover

A successful sale does not necessarily end on completion day.

Many buyers will want the existing owner to remain involved for a period to help transfer knowledge, introduce key relationships and support the management team.

The terms of this involvement should be clearly agreed.

Consider:

How long you will remain with the business
Your responsibilities
Your authority after completion
Your working hours
How customer relationships will be transferred
Any consultancy or employment arrangements
The date your involvement will formally end

A well-planned transition can reduce disruption and provide reassurance to employees, customers and the buyer.

How long does it take to sell a business?

There is no fixed timescale for selling a business.

Some transactions can progress relatively quickly, while others may take many months from initial preparation to completion.

Much will depend on the complexity of the company, the quality of the information available, buyer interest, funding requirements and the issues identified during due diligence.

What is clear is that the sale process often begins much earlier than the point at which buyers are approached.

If you are considering selling within the next few years, beginning preparations now can give you more time to improve the business, address potential risks and consider the most appropriate tax and transaction structure.

Planning your business exit

Knowing how to sell a business is about much more than finding someone willing to buy it. The strongest transactions are usually built on preparation.

By understanding the value of the business, improving financial reporting, reducing reliance on individual owners, preparing for due diligence and considering the tax implications early, you can enter negotiations from a much stronger position.

At SMH Group, our Corporate Finance team can support you throughout the process, from preparing your business for sale and establishing its value through to identifying buyers, managing negotiations, due diligence and completion.

If selling your business is part of your future plans, speaking to an adviser early can help you understand your options and prepare for the next stage with confidence.