How to Sell Your Business: A Quick Guide

Selling a business is often a once-in-a-lifetime event, representing one of the most significant financial transactions an owner will undertake. A well-planned sale ensures maximum value, minimises risks, and provides a smooth transition for both the seller and buyer. 

At our recent Ascentis Business Club, our quarterly progress and planning meeting for our clients in Leeds, Lee presented the Spotlight Session on the process of selling your business. For those who didn’t attend, you can now read a quick overview of Lee’s presentation. 

Whether you’re considering selling in the near future or simply want to understand the process, this guide will walk you through the key stages of selling a business.

1. Preparing Your Business for Sale

The process of preparing a business for sale should ideally begin years in advance. While many business owners only start serious preparations when a sale is imminent, the most successful exits come from businesses that have been structured with a future sale in mind from day one.

Key preparation steps include:

• Financial mastery – Ensure your accounts are in order and provide a clear picture of profitability.
• Developing a strong management team – Buyers look for businesses that can operate independently of the owner.
• Building recurring revenue streams – Predictable income increases business valuation.
• Protecting intellectual property – Secure trademarks, patents, and proprietary systems.
• Diversifying the customer base – Reducing reliance on a few key clients mitigates risk.
• Strategic growth planning – A clear vision for expansion enhances attractiveness to buyers.

Tip: Start preparing at least five years in advance to optimise your valuation and appeal to buyers.

2. Understanding Business Valuation

Business valuation is a crucial step in the sale process. It determines how much your business is worth and influences potential buyer interest.

Types of Business Sales

There are two main approaches to selling a business:

1. Share Sale

In a share sale, the buyer purchases the company’s shares, inheriting the entire business—including its assets, liabilities, and trading history.

✔️ Pros:

• More tax-efficient, benefiting from Business Asset Disposal Relief (BADR) (currently at 10%).
• Often provides a cleaner exit for the seller.

❌ Cons:

• Higher risk for the buyer, impacting price.
• Longer transaction process with extensive legal work and due diligence.
• Potential future tie-ins for the seller.

2. Trade Sale (Asset Sale)

In a trade sale, the business sells specific assets, such as customer contracts, equipment, or intellectual property.

✔️ Pros:

• Faster and simpler transaction, as buyers select only desired assets.
• Typically results in a higher purchase price.
• Allows for a cleaner break for the seller.

❌ Cons:

• Less tax-efficient—double taxation can apply.
• Corporation Tax (25%) on the sale of assets, followed by Capital Gains Tax (10%+).

Tip: Choosing between a share sale and an asset sale depends on your business structure, tax implications, and buyer preferences.

Learn everything you need to know about how to value a business in our recent blog. 

3. Creating a Sales Memorandum

A Sales Memorandum is the initial pitch document that provides potential buyers with key details about your business. It should include:

• Business history – Founding story, initial concept, and evolution.
• Current structure – Entity type, shareholders, and directors.
• Business Description – Products and services, competitive advantages and growth trends.
• Team – Organisation chart, descriptions of roles and staff.
• Operations – Brief description of office, production or warehouse facilities including leases and commitments. 
• SWOT – Strengths, Weaknesses, Opportunities and Threats. 
• Financials – Past five years’ accounts, revenue trends, and profit margins.
• Future growth potential – Expansion opportunities and reasons for sale.
• Price and exit terms – Sale structure, payment expectations, and timeline.

Tip: Preparing a strong Sales Memorandum not only attracts serious buyers but also highlights areas for internal improvement before sale.

4. Negotiating the Sale

Negotiations involve structuring the deal to satisfy both parties. It’s a delicate process where both parties aim to secure the most favourable terms while being cautious not to reveal too much. 

A well-prepared sales memorandum can help eliminate much of this uncertainty by providing essential information for potential buyers to make informed offers. However, such a document may not always be available. In an initial inquiry, usually a serious buyer presents an initial offer based on the last two years’ financial statements and the most recent 12 months of management accounts, following the signing of a non-disclosure agreement (NDA). 

It’s crucial to exercise caution at this stage, particularly if the potential buyer is a competitor, to avoid sharing sensitive information.

When it comes to selling your business, most individuals worry about this stage the most but fear not, here are the four key aspects to consider to make the process easier. 

1. Structure

• Share sale – Buyer takes full ownership of the company.
• Asset sale – Buyer selects specific assets and liabilities.

2. Price Considerations

The valuation process is influenced by business performance, market trends, and negotiation strategy.

3. Payment Structure Options

• Lump Sum – Full payment upfront (low risk, but often lower return).
• Deferred Consideration – Payments spread over time (can increase price but adds risk).
• Earnout – Payment linked to future performance (can significantly increase or decrease final value).
• Roll-up for Shares – Seller receives shares in the acquiring company (potentially high return, but long-term risk).

4. Terms and Conditions

Buyers and sellers must agree on warranties, indemnities, and conditions before finalising the sale.

Once there is a general agreement between both parties, the Heads of Terms can be drafted. It’s not a legally binding document although exclusivity and confidentiality would be in most cases. The Heads of Terms is mainly used as a framework for the solicitors to build the SPA. The key considerations should be drafted between buyer and seller then referred to the legal team for finalisation.

Tip: The best deals balance maximising value for the seller while minimising risk for the buyer.

5. SPAs And Due Diligence

An SPA is a Share Purchase Agreement or Sale Purchase Agreement and it sets out the legal framework to both parties so they are clear on their obligations and provides legal remedies if terms are breached.

Solicitors will have a template document they commonly use but these are heavily negotiated between both parties until a compromised position is found. 

The share or sales purchase agreement (SPA) will become the bible of the business sale and as you can imagine is therefore both the most important and detailed aspect of the process.  Whilst each deal will be bespoke here are some of the main aspects of the SPA:

• Identification of parties and contact information – This can be complex if group structures are brought into play.
• Assets to be sold – Either specific assets if trade sale or shares if equity sale
• Purchase price and Structure – This is an extension of the Heads of Terms and will also include completion accounts (See below)
• Completion accounts / adjustments – These are required to protect both parties and outlines any post-closing adjustments based on inventory levels, working capital, or other factors.
• Warranties and Indemnities – These are very important both in terms of content and classification as they will underpin any disputes and claims between the parties post sale.
• Non compete and Non Solicitation clauses – This will define exactly what both parties can do after the event.
• Employee and stakeholder considerations – Defines any key considerations for staff and it’s not unusual to have protected employment for a set period post transaction.
• Post completion support – This specifies the scope of any transitional assistance the seller will provide either by ways of employment or consultancy agreement.

Warranties & Indemnities

Warranties and indemnities are key legal concepts in business sale agreements that provide assurances and allocate risks between the buyer and seller. While similar, they serve distinct purposes and operate differently.

Mitigation

Whilst warranties and indemnities are important and fundamental to the sale process, its still important to mitigate against these as much is allowable.

To mitigate risks in a business sale, it’s crucial to conduct thorough due diligence and provide full disclosure through a well-prepared disclosure letter. 

The scope of warranties should be carefully limited using precise language to avoid broad or vague commitments, with qualifiers such as “to the best of the seller’s knowledge” to reduce liability for unknown risks. To further protect against financial exposure, sellers can cap liabilities, either by setting a maximum value or a percentage of the purchase price. 

Additionally, implementing time limits on claims and obtaining warranty and indemnity insurance can provide further safeguards, ensuring a smoother transaction with reduced post-sale disputes.

Due Diligence

The due diligence process is a root and branch review of the company’s value, operations, risks, and potential liabilities and it ensures that the buyer has a clear understanding of what they are acquiring and helps validate the terms of the transaction. It will typically include: 

• Financial
• Legal 
• Operational 
• Tax Due 
• Commercial 
• Environmental and Regulatory 
• IT and Cybersecurity
• Human Resources 
• Intellectual Property 
• Insurance 

Best practice for due diligence involves starting early and ensuring all financial information is up to date, including key contracts with suppliers and customers, employment agreements, insurance policies, and health and safety documents. Maintaining professionalism throughout the process is essential. 

To streamline document sharing, it’s advisable to create a secure data room rather than relying on email. Lastly, transparency is key—building trust with potential buyers can facilitate a smoother transaction and reduce the likelihood of disputes.

Tip: Engage experienced accountants and legal professionals to ensure due diligence is thorough and the SPA protects your interests.

6. Completion and Handover

Completion day marks the official transfer of business ownership from the seller to the buyer. It is a critical stage in the sale process, often involving multiple steps and coordination between legal teams, financial advisors, and the parties involved. While the exact process varies for each transaction, it typically mirrors the completion of a house sale, with structured legal and financial steps to ensure a smooth transition.

Key activities on completion day include:

• Final Review and Verification – Ensuring all terms and conditions are met.
• Signing of Final Documents – Executing the Sale and Purchase Agreement (SPA) and completing the disclosure letter to finalise warranties and indemnities.
• Handover of Assets – Transferring key assets, including bank accounts and mandates. In a share sale, banks may take time to process new mandates, so a trusted staff member should have interim access.
• Employee Handover – Communicating the change in ownership to employees, which may be their first official notification of the sale.
• Release of Funds – Typically managed via an escrow account held by solicitors. Some funds may be retained for post-sale adjustments, particularly for completion accounts.
• Post-Completion Documentation – Updating ownership records and executing share transfers to finalise the transition.

With careful planning and professional guidance, completion day can be a seamless and structured process, ensuring both parties fulfil their legal and financial obligations while securing a successful business sale.

• Signing final documents – Executing the SPA and disclosure agreements.
• Handover of assets – Transferring bank accounts, customer contracts, and operational assets.
• Employee communication – Informing staff about the transition.
• Funds release – Payment processing (some funds may be held in escrow).

Tip: Plan a structured handover to ensure business continuity and avoid last-minute issues.

7. Post-Sale Responsibilities

Before you can set off into the sunset there are still usually a number of post sale responsibilities that you will need to complete.

As well as the probable administrative duties of handing over bank mandates etc plus any legal obligation you’ve committed to in the SPA the most significant post sale transaction is likely to be the completion accounts.

The completion accounts effectively bridge the valuation process from the initial talks and heads of terms to the completion accounts – as these can be months (if not years) apart.

Key Takeaways

• Stay Professional – Approach negotiations with a level head and avoid emotional decision-making.
• Be Prepared for Trade-Offs – No business is perfect, and due diligence may uncover issues. Be clear on your non-negotiables while remaining flexible.
• Work with the Right Professionals – Surround yourself with an experienced legal, financial, and advisory team to guide you through the process.
• Avoid Common Pitfalls – Ensure due diligence is thorough (soft-touch due diligence can backfire), be cautious of private equity buyers looking for undervalued deals, and be prepared for potential disputes over completion accounts.

A well-structured and professional approach will help secure the best possible outcome when selling your business.