Firstly, take professional advice on the value of your business, on whether there are any assets (for instance premises) which you should retain or sell separately in order to maximise value, on how and to whom to market your business, on what terms a potential purchaser might offer and on how a sale could be structured to minimise your tax liability on the sale proceeds.
You can expect anyone interested in purchasing your business to carry out a commercial, financial and legal investigation ("due diligence") on your business, which means that you will need to provide to a prospective purchaser information on the business, its turnover, financing and cash flow (both historic and prospective), assets, liabilities, employees, premises, suppliers and customers. You should ensure that any prospective purchaser signs a legally binding confidentiality undertaking before you make any information available, and you should be on your guard against a business competitor expressing interest in your business in an attempt to gain commercially useful information and to gain a commercial advantage but without having any real interest in purchasing your business.
This note assumes that you, or your company, are selling the goodwill and assets of the business, and that the sale is not of the shares of a company which owns and carries on the business.
What are you selling?
What is it that you actually have to sell - goodwill, plant, machinery, equipment and vehicles and stock of raw materials, work -in- progress and finished goods. Anything else? What about intellectual property?
Do you own the business premises, or are they leased?
If they are owned, do you want to sell them to the purchaser of the business or to retain them as an investment property and lease them to the purchaser? If they are leased, it is likely that the consent of the landlord will be required for the lease to be assigned to the purchaser. What implications will a refusal by the landlord to consent, or a delay by the landlord in consenting, to an assignation of the lease have on your plans to sell the business?
If you are selling stock, will a stocktake be be required to verify what stock there is, and how is the stock to be valued, for eg at the lower of cost and net realisable value? What about old and obsolete stock? How will you resolve any dispute with the business purchaser on the value of the stock - by reference to a independent valuer (but an independent valuer would need clear guidance on the basis on which the stock is to be valued, and who is to pay the costs of the independent valuation)?
The purchaser is unlikely to pay you for the cash in the business and will expect you to retain that cash; but what about the book debts of the business? The purchaser is unlikely to want to buy the book debts, unless you are prepared to sell the book debts for a substantial discount allowing the purchaser to recover in the collection of the book debts substantially more than the purchaser paid you for the book debts. Further, the purchaser is likely to be unhappy at the idea of leaving the collection of the book debts to you, in case you take aggressive steps to recover the debts from customers of the business and in doing so damage the relationship of the business with those customers and the goodwill of the business which the purchaser has bought from you. On the other hand, you may be concerned that the purchaser will not be sufficiently proactive in collecting the book debts if the collection of the book debts is left to the purchaser, and the purchaser might use any payment from a customer not to pay you but to settle an invoice issued by the purchaser to the customer after the purchaser's acquisition of you business, leaving you unpaid.
One solution may be to agree with the business purchaser that the purchaser will be given a period to collect what is owing to you by customers of the business (and that after that period you are free to take whatever steps you want to collect what then remains owing to you by customers of the business), that any payment by a customer is allocated to the oldest outstanding debt owing by that customer to the business (so that you get paid before the business purchaser gets paid), that the purchaser must pay over to you any payment received by the purchaser on your behalf within a specified period after the payment was received by the purchaser and that the purchaser, as an incentive to collecting payment of what is owing to you, is entitled to a commission on (perhaps expressed as a percentage of) the payments collected by the purchaser on your behalf.
Do you have any uncompleted contracts, perhaps orders for raw materials or goods for resale and orders for the sale by the business of goods or services, which you will require the purchaser to complete on your behalf? Can any uncompleted contracts be assigned to the purchaser, or do the terms of the contracts prohibit you from assigning the contracts to the purchaser? If contracts cannot be assigned by you to the purchaser, can the purchaser agree to complete the contracts on your behalf, and how is the cost and benefit of a contract to be shared between you and the purchaser?
How many employees does the business have?
It is likely that under TUPE the employees will, on the sale of the business, automatically become employees of the purchaser on their existing terms and conditions of employment and on the basis of continuous employment; but TUPE is complicated and you should seek specialist employment law advice. What, for instance, if the purchaser plans to relocate your business some distance from where the employees currently work.
By law, the seller and the purchaser of a business need to consult with employees on the implications for the employees of a sale of the business, and you will need to provide the purchaser with information on the employees so that the purchaser can consult with the employees.
Are there any liabilities of the business which you would need the purchaser to assume from you? For instance does the business have any contingent liability to service, rectify or replace any faulty goods which the business has already sold? How material are the liabilities and contractual commitments which you need the purchaser to take over from you and what is the relevant time frame? Should you look for any third party guarantee, for instance from the owner of the purchaser if the purchaser is a company, to give you comfort that those liabilities and contractual commitments will be met and that you will not find them coming back to haunt you?
One foot still in the door
Are you retiring from the business? Do you want any ongoing role, perhaps as a consultant, in the business? Indeed the purchaser may be keen for you to have, at least in the short term, an ongoing role in the business to ensure a smooth handover of the business. Are you prepared to give (and the purchaser will expect you to give) a restrictive covenant preventing you, for an agreed period and within an agreed geographic area, from competing with the business and from poaching employees, suppliers and customers of the business?
The purchaser is likely to seek warranties and undertakings from you confirming that the information you have provided to the purchaser on the business is correct and confirming the accuracy of assumptions made by the purchaser in the purchaser's decision to purchase the business on the terms agreed with you. The purchaser will be entitled to damages, effectively cash back, from you if any of those warranties proves to be incorrect, and limitations both on when the purchaser can make a claim under such warranties and on how much the purchaser can recover from you under such warranties will need to be negotiated and agreed.
In addition to the price, or the means of ascertaining the price if the price is for eg dependent on a stocktake or any future profit or turnover of the business, when (and if appropriate in what instalments) the price is to be paid will need to be negotiated and agreed.
Have you granted any security, perhaps to a bank, over any assets of the business? Will your lawyers need to liaise with the holder of any security to ensure that the security is released in exchange for an appropriate payment out of the proceeds from the sale of the business?
Consider third party consent
What other third party consents may be required for a sale of the business? The question of landlord's consent to any assignation of the lease of the premises used by the business and the question of the consents of third parties to the assignation to the purchaser of the contracts which the business has with those third parties have been mentioned above; if the business needs any licence, will the consent of the grantor of the licence be required to a sale of the business?
Dealing with details
Do not forget the minutiae - dealing with the public utilities, the cancellation of standing orders/direct debits, the cancellation of no longer required insurances etc, and you may want to agree with the purchaser the terms of a press announcement and of an announcement to employees, suppliers and customers that the business has been sold to the purchaser.
Take professional advice when you start thinking of selling your business; time spent in planning the sale process will be time well spent and time spent getting clear in a Sale Agreement what the terms of the sale are, getting clear what your rights and obligations in the sale are and getting clear what the rights and obligations of the purchaser in the sale are, will ensure that there are no nasty surprises for you following the sale and that, whether you are retiring or setting up a new business, you can do so without worrying about the business that you have sold.