What Costs Are Involved When Selling Your Business?

Establishing and growing your business takes years of hard work and dedication. So, if you have decided to sell your company, you’ll want to be rewarded with a sale price that reflects the effort you’ve put into building it. At the same time, you’ll want to make sure you keep the selling costs to a minimum.  

In this article we offer a quick guide to the main costs to consider when selling a small business in the UK so you avoid paying more than its fair or necessary. 

LEGAL SERVICES.

One of the main expenses involved in selling a business is using lawyers to cover all legal aspects of the transaction. But do I really need a lawyer to sell my business and can I sell my business without a solicitor? You can, but you need to be aware that the farther you get into the process, the more complex it will get and the higher the chances of making mistakes or overlooking aspects that can be pricey to rectify.   

Moreover, using the services of a solicitor is particularly important if you employ staff, as you will want to get up-to-date advice on the correct procedure to communicate any changes to your employees and ensure their labour rights are respected. 

Solicitor fees vary enormously and can go as high as £1,000 / hour for experienced top City lawyers. Solicitors may also operate on a fixed-fee basis, and at the time of writing the average solicitor fees for selling a business amounted to 1% of the transaction’s value. At Carbon, we have a team with decades of experience in buying and selling businesses at competitive rates and fee structures that better align our incentives with yours. Contact me to find out more here. 

GETTING A VALUATION.

Since the cost of selling a business is linked to its value and to current market conditions, it’s essential to get a professional valuation to understand the true value of the business worth and any assets related to the company, if you also plan on selling them. A professional valuation will take into account both assets and liabilities so you will have a more balanced perspective on what is a fair business sale price.  

In short, appointing a valuer provides you with a solid starting point for the entire process. Again, valuation costs vary almost as much as valuation techniques do, and they can be charged as flat fees of per hour of work.  

PROFESSIONAL ADVERTISING SERVICES.

Next you’ll want to consider using services to advertise the business. These can be either brokers or an advertising platform like BusinessesForSale.com, which connects buyers and sellers from all over the world ensuring there’s a good fit. 

The costs of hiring a business broker vary depending on their experience and their success fees. If you believe you require this service, it’s worth choosing a broker who has industry-specific experience in your sector, not only because it can help with a smooth transaction, but also because you’ll have more chances of getting the highest price for your business.   

It’s also worth investigating no-sale-no-fee options. Generally speaking, business broker fees in the UK are anything from 1% to 10% of the business value, and fees grow smaller the bigger the business for sale is.  

ADDITIONAL COSTS.

 Other costs you may want to budget for include: 

  • Taxes. After selling a business, you may be liable for Capital Gains Tax, but reductions or exemptions may apply so it’s important to get professional advice from an accountant. 

  • Costs related to selling real estate if you are also selling the commercial property your business is located in. These include conveyancing fees, estate agent fees, and mortgage redemption or arrangement fees where applicable. 

  • Use of an escrow agent. This is common in corporate transactions and give you additional peace of mind, since funds are held by an independent third party until all aspects of the transaction are finalised to the satisfaction of both parties. 

When selling a small business, preparation is key and it’s never too early to start planning all aspects of this transaction. You can find more details and invaluable advice on what it takes to sell your business here.   

Author
Robert Flint
Robert Flint

Carbon Law Partners’ Robert Flint is a Corporate and Commercial lawyer with particular experience advising start-ups and small businesses.