Want to sell my small business but I don’t know how

[Dontknowwhatimdoingg]

I own a marketing agency that specialises in beauty and fashion. We’re still young I guess, incorporating three years ago.

We’re making about £225K in profit annually at the moment.

The issue is I’m starting to hate it. I feel under pressure so often and I really want to go back to working freelance before I totally break down.

I also want a life that better works around my son. He has significant needs (he’s 4 now) and I just want to be with him as much as possible.

Basically, owning a business is too much for me and I have decided I want to sell.

But I have no idea how I go about it. I don’t know what I’m doing, how to sell a business, or whether to to look at brokers etc.

Would appreciate any help or advice on this because I’m drowning :(

I'm not sure where you should look for this sort of advice, but it isn't in AIBU. I can see why you want to give up on it, but I wonder whether you could just employ staff to do your job?

I would also look at employing staff. You loose some money paying staff obviously, but you gain time instead, which will give you more time with your son.

Don’t know about selling a business though.

How many people do you employ? The best thing to do would probably be to transition out with someone you employ taking over.

If you are making that much profit I assume you have accountants? They may have a corporate finance department that can advise on how to sell? Or can refer you to firm that does? Then go for a no strings coffee with them and see what comes up. Business sales can be long burning, people often dance around it before committing, so don’t worry you would be wasting their time if you are not 100% sure re a sale.

Also, is there a Marketing Institute? Can they advise re business sales?

You need an accountant to do the valuation, figure out a way of marketing the business and have a lawyer to handle the sale.

There's normally a clause in business sales that stops you running a similar business for a number of years in the same geographical area or sales type. So I'd get advice early on on whether you'd be able to freelance.

Banks can be a total bugger for not processing things on time.

First of all get it valued by an accountant who specialises in trade valuations. You use the word 'we' which suggests you already have staff. This may indicate you have a business that could be sold as a Going Concern. This essentially means you could step away and the business could run itself if a manager was put into your shoes. In that situation the business could have a value because a purchase can buy this business, with a team in situ, contracts and potentially a name or goodwill.

Much depends on the analysis of your sales and customer base. If you have 2-3 large customers only the business might not be worth as much as one with 10-20 customers (at the same turnover and profit levels). The business is normally valued on a multiple of sustainable income. That could be anywhere between 0.8 to 3.0 times for a 'consultancy' type business.

What is not clear is if the £225k profit is before or after your salary. If it is before and £75k a year is what you pay yourself the multiple will be based on £150k. However, you could negotiate as there is always room for that. You might negotiate a multiple of £200k with the proviso that you will work for the business freelance for the next two years at a salary of £60k for 4 days. A purchase might like that as you are tied in to help steer the business, but without the senior responsibility.

Avoid the national business sales agencies, unless desperate. They are a bit grubby at this level. Perhaps approach some competitors of a similar or slightly larger size. But be coy about your customers and MO until you have interest and a confidentiality agreement signed. This is the order:

1. Accountant for a decent valuation.
2. Solicitor for a confidentiality agreement (and possible run through draft Heads of Terms).
3. Approach senior contacts in the field and trade bodies.