If you are a business owner contemplating the sale of your business, you’re likely feeling the pressure of an unpredictable economic landscape and looming first budget of the new Labour government, on the 30 October. With speculation about potential changes to business property relief on inheritance tax (IHT) and capital gains tax (CGT), it’s understandable to feel uncertain. You may feel that you’ve missed the boat and that it’s too late to start a sale process, but the reality is we don’t know the detail of any changes yet, or the timing of when any changes will come into effect.
Before you make any hasty decisions, it’s crucial to take a step back and consider a strategic approach to ensure you’re in the best position possible.
Understanding the Context
Recent political shifts often bring about changes in fiscal policy, which can create ripples of uncertainty for business owners. The new government’s first budget could introduce significant alterations to tax regulations, including those affecting business property relief and CGT. Business property relief, which allows for a reduction in IHT on certain business assets, has been a key factor in estate planning for many entrepreneurs. Similarly, any changes to CGT could affect how much you’ll owe on the sale of your business.
While it’s natural to be concerned about these potential changes, panicking or rushing to sell in response to speculation might not be the most prudent course of action. Instead, focus on preparation and strategic planning to ensure that when the time comes, you’re in a strong position to make the most of your business sale, regardless of the tax landscape.
Review Your Personal Position and Future Plans
Before diving into the specifics of selling your business, take a moment to review your personal financial position and future plans. Understand your financial goals and how the sale of your business fits into these plans. Are you aiming for a retirement fund, a new investment venture, or perhaps something else entirely?
A comprehensive business review will help you determine how urgent the sale is and what your ideal timing might be. This also includes assessing your current financial health, any outstanding debts, and your investment portfolio. Understanding your financial needs will give you a clearer picture of whether you should proceed with selling now or if you have the flexibility to wait for more favourable conditions.
Get Your Business Ready for Sale
Whether or not changes to tax laws are on the horizon, the key to a successful business sale lies in preparation. A well-prepared business not only attracts more buyers but can also command a higher price. Here’s how to ensure your business is ready:
- Financial Documentation: Ensure your financial statements are up-to-date and accurate. Potential buyers will scrutinise these documents, so having clean, comprehensive financial records is essential.
- Operational Efficiency: Streamline your operations and address any inefficiencies. A business that runs smoothly and has well-documented processes is more attractive to buyers.
- Legal Compliance: Make sure all your legal documents, contracts, and licenses are in order. Address any outstanding legal issues to prevent complications during the sale.
- Business Valuation: Obtain a professional business valuation to understand the worth of your business. This will help you set a realistic price and negotiate effectively with potential buyers.
Seek Early Advice for the Best Outcome
The confidentiality of private company sales often shrouds the exit process in mystery, leading to misconceptions and value distortions. Selling a business is a critical financial decision requiring expert guidance to maximise value and choose the optimal exit strategy. Seek early advice to ensure a well-planned and successful business exit.
Whether you’re in the early stages of considering an exit or have already embarked on the journey, contact Geoff Pinder (07717 874357) or Nick Lankester (07760 270728) for a confidential discussion.