2 min read
Financial housekeeping
Ensure the last three years of accounts are professionally prepared and filed on time at Companies House. Remove personal expenditure from the company's profit and loss — buyers and their advisers will identify and challenge it during due diligence, and it is better to normalise accounts cleanly before the process begins. Reduce or document all related-party transactions at arm's-length rates.
If the business carries significant cash, consider whether it can be distributed to shareholders ahead of sale — buyers generally pay for trading earnings, not excess cash sitting in the business, unless specifically agreed.
Legal and contractual tidying
Ensure all key customer and supplier contracts are in writing, signed, and up to date. Verify that IP (trade marks, domain names, software licences) is registered in the company's name rather than a director's personal name. Check employment contracts are current and compliant. Identify any leases — particularly personal guarantees given by directors — that a buyer will need to address.
Reducing key-person risk
Buyers discount businesses where the selling director holds all the customer relationships or technical knowledge. In the 12–24 months before sale, actively introduce key customers to a second-tier management team, document processes and systems, and — where possible — transition relationship ownership to people who will remain post-sale. This is often the single most value-accretive preparation a selling director can make.
Professional team and pre-sale restructuring
Appoint a corporate finance adviser (an M&A broker or accountant with a corporate finance division) to advise on valuation expectations, manage the sale process, and prepare the information memorandum. Engage a solicitor who has handled similar transactions. If any pre-sale restructuring is contemplated — separating a property from the trading company, creating a holding company structure — allow sufficient lead time, as some restructuring requires HMRC advance clearance. Confirm all pre-sale steps with your tax adviser.
Frequently asked questions
Should I tell my employees I am planning to sell?
This is a commercial judgement. Many directors keep sale plans confidential until late in the process to avoid unsettling key staff. Once a transaction is approaching completion, employees may have a right to be informed and consulted under TUPE if it is an asset sale. Your solicitor can advise on the timing and nature of required communications.
Does a business need to be growing to achieve a good sale price?
Growth trajectory is an important factor in valuation multiples. A declining business can still be sold, but typically at a lower multiple. Where possible, defer a sale until at least two years of consistent growth can be demonstrated in the accounts.
Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.