Selling a Business – Thinking of Selling
As soon as a business owner thinks about selling these questions are always front of mind, so quick answers below which we’ll expand on here and throughout intelligent.co.uk
- “How long will it take?” Often months, not weeks—especially once legal and lender processes begin.
- “Will I have to stay on?” Usually yes, at least for a transition period.
- “Is it confidential?” It can be managed confidentially through staged disclosure and NDAs.
- “Is the headline price the main thing?” No—terms and certainty of completion matter just as much.
These are closely followed by questions about how to prepare, valuations, more confidentiality questions, dealing with buyers, the process - especially negotiations - due diligence, support and most importantly getting paid! What most owners don’t think about is looking after themselves through the process which we cover here (link). Rest assured that we are here to guide, inform, support and even challenge you when required to help you achieve a successful sale.
We’ve also supplied a jargon busting glossary to help you understand the common terms used in business sales.
Remember, most people will never own a business, much less sell one and those that do usually only do it once so its completely natural to be unsure or even apprehensive about the process. We’ve helped over a thousand people in your position successfully sell their businesses and are rated ‘Excellent’ by sellers and buyers on Trustpilot. You are in safe hands.
Stage 1: Pre-sale preparation (before going to market)
Goal: make the business easy to understand, easy to fund, and easy to transfer.
What typically happens:
- You clarify why you’re selling, your preferred timescale, and what “success” looks like.
- You gather key information (accounts, contracts, HR basics, customer/supplier details).
- You identify risks a buyer will question (owner dependency, customer concentration, informal processes).
- You work towards a realistic business valuation range based on maintainable profit and market conditions.
Owner checklist (quick):
- 3 years accounts + current management figures
- List of key customers/suppliers and contract terms
- Staff roles, contracts, and dependencies
- Premises details (lease/freehold) and key licences/insurances
Stage 2: Valuation and positioning
Goal: agree a price range and present the business in a way that attracts the right buyers.
What typically happens:
- Profits are “normalised” (adjusted for owner-specific costs) to show maintainable profit.
- The business is positioned around what buyers value: stability, transferable systems, growth potential, and manageable risk.
- You decide how to sell: confidential sale, open marketing, or a targeted approach.
Key point:
- Most businesses don’t have a single “fixed” value—expect a valuation range influenced by risk, funding, and deal terms.
Stage 3: Marketing and buyer screening
Goal: generate serious interest while protecting confidentiality and your day-to-day trading.
What typically happens:
- Anonymised marketing is used if confidentiality matters.
- Buyers are screened before sensitive information is released.
- NDAs are signed before sharing detailed information.
- Enquiries, calls, and viewings are managed to maintain momentum.
What good looks like:
- Quality of buyer > quantity of enquiries
- Fast responses to serious buyers
- Controlled release of information
Stage 4: Offers and negotiation
Goal: secure the right offer on the right terms (not just the highest headline price).
What typically happens:
Offers are assessed based on:
- Cash at completion
- Conditions (funding, due diligence requirements)
- Deal structure (asset vs share sale, working capital assumptions)
- Any earn-outs or deferred payments
- Heads of Terms are agreed to set the deal framework before due diligence begins.
Key point:
- The “best” offer is often the one most likely to complete on acceptable terms.
Stage 5: Due diligence and legal completion
Goal: prove what the buyer is buying and remove uncertainty.
What typically happens:
- Buyers (and often lenders) review financial, legal, operational and HR information.
- Solicitors progress the legal documents (SPA/APA, disclosures, warranties).
- Final deal terms are confirmed, including working capital and any retention/earn-out mechanics.
Typical UK timeframe:
- Often 2–3 months for due diligence, but preparation and responsiveness make a major difference.
Why deals fail here:
- Missing documents
- Inconsistencies in financials
- Undisclosed issues discovered late
- Slow responses causing “deal fatigue”
Stage 6: Completion and handover (post-sale)
Goal: a smooth transition that protects value and relationships.
What typically happens:
- Completion happens, funds transfer, and ownership changes.
- A handover period begins (commonly 6–12 months, sometimes longer).
- If there’s an earn-out or deferred element, performance reporting and responsibilities must be clear.
Key point:
- Protect yourself with clear boundaries on your post-sale role and robust legal protection.
Mini glossary (plain-English)
Acquisition (buying a business)
When a buyer purchases a business (either the company shares or the assets of the business).
Asset sale (asset purchase)
The buyer purchases the business assets (e.g., stock, equipment, goodwill, customer base) rather than the shares of the limited company. The seller keeps the company itself (and any liabilities not included in the sale), subject to the deal terms.
Completion
The point when the legal sale finishes, ownership transfers, and the agreed money is paid (or the payment plan starts).
Deferred payment
Part of the sale price paid after completion—often in instalments on agreed dates. It’s not dependent on performance (unlike an earn-out), but still needs legal protection.
Disclosure letter / Disclosures
A formal document where the seller discloses known issues (e.g., disputes, liabilities, contract risks). This helps limit future claims by showing what the buyer was told before completion.
Due diligence (DD)
The buyer’s detailed investigation of the business before completing the purchase—covering financials, legal matters, contracts, HR, customers/suppliers, and operations.
Earn-out
Part of the sale price that is only paid if the business hits agreed targets after completion (often based on profit, revenue, or other KPIs). Earn-outs can bridge valuation gaps but carry more risk for the seller.
EBITDA
A profit measure often used in valuations, especially for larger businesses: Earnings Before Interest, Tax, Depreciation and Amortisation. It’s a way of looking at trading performance before certain accounting and financing items.
Exclusivity
A period (agreed in Heads of Terms) where the seller agrees not to negotiate with other buyers while the chosen buyer carries out due diligence and legal work.
Goodwill
The value of the business beyond physical assets—often linked to reputation, customer relationships, brand, and expected future profit.
Heads of Terms (HoT) / Letter of Intent (LoI)
A document that sets out the key deal terms before solicitors draft the full legal agreements. Usually “subject to contract” (not fully legally binding), but may include binding clauses like exclusivity and confidentiality.
Maintainable profit
The level of profit a buyer can reasonably expect to continue after the sale, once one-off items and owner-specific costs are adjusted. This is often what valuations are based on.
NDA (Non-Disclosure Agreement)
A legal agreement requiring a potential buyer to keep your business information confidential.
Normalised profit / Normalising the accounts
Adjusting the accounts to show what the business would likely earn under normal ownership (e.g., removing one-off expenses or personal costs). Adjustments should be reasonable and evidenced.
Share sale (share purchase)
The buyer buys the shares of the limited company, taking ownership of the company as a whole (including its assets and liabilities), subject to warranties, indemnities and disclosures.
SPA / APA
The main legal contracts:
-
SPA = Share Purchase Agreement (for a share sale)
-
APA = Asset Purchase Agreement (for an asset sale)
Transition / Handover period
The period after completion when the seller helps the buyer take over smoothly. This might be full-time initially, then tapering, or a consultancy arrangement.
Warranties
Legal statements the seller makes about the business (e.g., accounts are accurate, contracts are valid). If a warranty is untrue and causes loss, the buyer may be able to claim.
Working capital
The cash needed for day-to-day trading (typically current assets like stock and debtors minus current liabilities like creditors). Many deals assume a normal level of working capital is left in the business at completion so it can operate immediately.
Most misunderstood terms (quick clarity for first-time sellers)
1) “Business valuation” (and why it’s often a range)
A valuation is rarely a single fixed number. It’s usually a range based on maintainable profit, risk, funding realities, and deal terms. The final outcome depends on both price and structure (cash at completion vs deferred/earn-out, for example).
2) “Normalised profit” (it’s not saying your accounts are wrong)
Normalising adjusts profit to show what a buyer could realistically earn under typical ownership. It often removes one-off items and owner-specific costs. Adjustments must be reasonable and evidenced—buyers and lenders will test them during due diligence.
3) “Working capital” (the bank balance is not automatically yours)
Working capital is the money required to run the business day-to-day (often stock + debtors minus creditors). Many deals assume a normal level of working capital stays in the business at completion so it can trade immediately. “Excess cash” may be treated separately—but it’s deal- and tax-sensitive.
4) “Heads of Terms” (it’s not the final contract)
Heads of Terms sets the main commercial points (price, structure, timescales, exclusivity) but is usually subject to contract. The binding commitments often relate to confidentiality and exclusivity, not the full sale itself.
5) “Exclusivity” (you may be off the market)
Exclusivity means you agree not to negotiate with other buyers for a period while one buyer progresses due diligence and legal work. It can be sensible—but it should be time-limited and linked to clear progress expectations.
6) “Due diligence” (it’s not a formality)
Due diligence is where deals often slow down or fail. Buyers use it to confirm facts and reduce risk, not to “be awkward”. Fast progress usually comes from good preparation and quick, consistent responses.
7) “Earn-out” (not guaranteed money)
Earn-outs link part of the price to future performance. They can bridge valuation gaps, but they carry risk: you may not control decisions after completion, and measurement can be disputed. Earn-outs need clear definitions, reporting rules, and legal protection.
8) “Warranties and disclosures” (be honest early)
Warranties are legal promises about the business. Disclosures are where you set out known issues so buyers can’t claim they were misled later. The best protection is usually full transparency and good specialist legal advice.
9) “Cash at completion” (the headline price isn’t the same as what you receive on day one)
A £1m sale does not always mean £1m on completion day. The payment could include deferred elements, earn-outs, retained funds, or working capital adjustments. Always compare offers on certainty and timing of payment, not just the headline number.