The Team at iBOSS have many years of experience of both acquiring and selling businesses. This is both on a personal basis and supporting and guiding clients through the process. Here we are talking about established businesses, although we can also help with planning and financing startups.

The following is a summary of some of the main factors to be considered when acquiring or exiting an established business.

Buying a Business

Buying a small business in the UK can be an exciting and potentially lucrative venture. It’s not a process not to be taken lightly, however, as it can be fraught with potential pitfalls. These can turn a would-be dream into a nightmare. Buyers, particularly inexperienced ones, need to be aware of the various dangers that could jeopardize their investment.

The following are some of the main dangers:

1.  One of the most regular mistakes buyers make is not conducting thorough due diligence. This involves a comprehensive review of the business’s financial records, legal standing, operational practices, and market position as well as HR matters. Failure to do so can lead to unpleasant surprises such as hidden debts, legal issues, or operational problems.
   
   
2. Failing to fully understand the market in which the business operates is another potential danger area! A business might seem profitable, but if the market is in decline or overly saturated, future growth could be limited. It is essential to analyse market trends, customer demographics, and competitors to ensure the business has a sustainable future. Does the business have the right products to meet future demand?
   
   
3. Like many countries, the UK has stringent regulations governing various business sectors. Ignoring these can lead to hefty fines or even the closure of the business. It is therefore essential to ensure the business complies with all local and national regulations, e.g. health and safety standards, employment laws, and environmental regulations.
   
   
4. Before acquiring a business it is essential that the purchaser has a clear and realistic plan for the future. This plan must outline the vision, objectives, and strategies for growth. It should also include marketing strategies, financial projections (including acquisition costs), and operational improvements. A well thought out business plan will guide your actions and decisions post-purchase, ensuring a smoother transition and better chances of success.
   
   
5. Paying ‘over the odds’ for a business is a common pitfall. Ensuring that the valuation is based on objective criteria, including current financial performance, market position, and future potential is essential. Do not ever rely solely on the seller’s valuation. An independent valuation by experts to get an accurate assessment of the business’s worth is highly advisable.

Buying a small business in the UK can be rewarding, if approached with caution and thorough preparation. Avoiding these common dangers can help ensure a smooth acquisition process and pave the way for a successful business future.

This is where we at iBOSS come in! By using our services and experience to conduct necessary due diligence and careful planning, you can save a considerable amount of time and effort and often money! The aim will be to turn your business purchase into a profitable investment.

Preparing to Exit a business

As with acquiring a business, selling one is also a significant milestone that requires meticulous planning and preparation. Whether you’re looking to retire, pursue new ventures, or simply capitalize on your hard work, preparing your business for sale is crucial to maximizing its value and ensuring a smooth transition.

The Team at iBOSS have considerable experience in assisting clients to prepare their businesses for sale. This includes being the Vendor of their own businesses, as well as advising clients. In other words, we have ‘hands-on’ experience. Developing a comprehensive Exit Strategy is essential in achieving a smooth sale and transition. As a guide, the following is a list of some of the important matters to be considered and dealt with.

1. Evaluate and update Financial Records.
   
   Ensure that all financial statements are up-to-date and accurate. This to include (but not restricted to) profit and loss statements, balance sheets, and cash flow statements,. Prospective buyers will scrutinize these documents to assess the financial health of your business.
   
   Consider having your financial statements audited by an independent CPA. An audit provides credibility and reassurance to potential buyers about the accuracy of your financial records.
   
   
2. Maximise cash flow and reduce debts to make your business more attractive.
   Demonstrating a healthy cash flow and minimal debt will indicate a well-managed and profitable business.
   
   
3. Obtaining a professional business valuation is advisable.
   
   This process will provide a realistic estimate of your business’s worth, which is crucial for setting a fair asking price. iBOSS can advise on suitable companies to use for this.
   
   Having said this, it is a good idea to familiarize yourself with different valuation methods, especially if you are inexperienced in this subject. For example methods such as asset-based, income-based, and market-based approaches. Understanding these methods can help you justify your asking price to potential buyers. Here again iBOSS can provide advice and clarification.
   
   
4. Review Operational Efficiency.
   
   Identify  and address inefficiencies in your operations. Implementing cost-saving measures and optimizing workflows will appeal to buyers looking for a well-run business.
   
   This includes standard operating procedures, employee roles and responsibilities, and any proprietary methods. Clear documentation helps ensure a smooth transition and adds value by reducing dependency on the current owner.
   
   
5. The Management Team.
   
   The decision as to whether the existing management team is retained will depend on a number of factors, but ultimately will be up to the Buyers unless, of course, Team members decide to leave anyway.
   
   If your management team is strong and capable of running the business without your direct involvement the Buyers may well want to keep them on, particularly the ‘Key Staff’. Redundancy matters will also need to be addressed.
   
   
6. Diversify Customer Base and Revenue Streams.
   
   A summary of future growth &/or expansion possibilities (products, revenue streams etc.) is likely to be helpful in encouraging potential buyers, as long as it is realistic!
   
   
7. Review Legal and Regulatory Compliance**
   
   It is essential to verify that your business complies with all legal and regulatory requirements. This includes permits, licenses, intellectual property rights, and industry-specific regulations. Non-compliance can deter buyers and complicate the sale process.
   
   Equally one should attempt to ensure that there are no pending legal issues or disputes. Buyers will conduct due diligence, and unresolved legal matters can be a red flag that jeopardizes the sale.

Thus preparing your business for sale is a multifaceted process that requires careful planning and execution. An experienced broker such as iBOSS can help you navigate the complexities of the sale process in the most effective way. From marketing the business to negotiating with buyers and closing the deal you can significantly increase the attractiveness and value of your business.

In conclusion.

Whether you are considering purchasing or selling a business, iBOSS can provide the expertise needed to navigate these complex journeys successfully. With a well-prepared business plan or a clear exit strategy, you can achieve a successful transition that meets your financial and personal goals. Where needed, however, we are quite prepared to adopt a ‘hands-on’ approach!

As an example of the support we can provide, we recently helped a client to acquire a retail business. Click on this link for details: https://theiboss.co.uk/helping-our-client-to-buy-a-business/

To learn more about how we can provide the expertise you need, call us on 07876 503830 or 07770 866955, or complete our enquiry form for a free consultation. We should also mention that we can help with raising finance for business acquisition if needed. We look forward to hearing from you.

The initial enquiry

iBOSS was approached, by a legal advisor contact of ours, to help a client of his, who was considering purchasing a well-established retail business. That business is based in Cambridgeshire and trades under the name of Cambridge Interiors. This was a ‘retirement sale’ of a company involved in selling curtains, carpets and other flooring materials. It has been in existence for some 30 years with a solid customer base.

Following an initial consultation with Alistair, the client, we agreed to help him to produce a business plan for the acquisition and development of the business.

The investigation process

Initially a request was made for historical financial information from the seller (sent under an NDA). iBoss reviewed the information provided. Financial analysis quickly identified that the asking price was significantly too high based on the historical financial performance. Furthermore, the seller also wanted ALL the consideration paid ‘up front’.

Before preceeding further, we worked with Alistair on developing a business plan to assess the future viability of the business.

As a result, IBOSS advised the client that, on this basis, we would not recommend that the client acquire the business. He was determined, however, that he wanted to buy the business. Before preceeding further, therefore, we worked with Alistair on developing a business plan to assess the future viability of the business.The result was that there followed a period of several weeks of negotiations, based on the conclusions from the plan. These took place between between our client, his lawyer and the seller.

The Deal

A deal was agreed with the Seller on the following basis:

• An asset purchase agreement not a share purchase.
• The final agreed purchase price was significantly below the originally advertised asking price.
• On completion the initial payment was based on the value of the assets acquired. The remainder of the consideration ‘Goodwill’ was structured on a deferred basis against agreed performance targets.

This resulted in the buyer having no requirement to borrow any money as, with the reduced price and deferred terms. he had sufficient resources to buy the business and provide the initial cash flow injection required.

A few problems

It was also noted, however, that there were a number of other problems to overcome. Specifically:

• Whilst our new client had a sales and marketing background, it was not in retail. The Directors of iBOSS, on the other hand, do have this experience. We were comfortable therefore in advising on this type of business.
• One particular problem was the trading name of the current business. This had not been registered originally and subsequently (some years later) someone else had registered the name. Thus our client was obliged to register his business under a different name. This raised promotional problems in carrying over the existing ‘goodwill’.
• The Seller was well known and respected in the local area. He was not, however, up to date either in terms of IT. This applies to both business data, and the promotional benefits of social media. Luckily our client is.
• Our client had many ideas, both in terms of promotion and expansion of the product range. What he needed, however, was our expertise in developing thess into a proper, logical plan. Exactly what iBOSS is about!
• There were a number of ‘legal’ matters. These were comprehensively covered by his legal advisor, who we are very comfortable working with.

A satisfactory result

The end result was that terms were agreed with the owner and the various members of staff. The purchase has now been completed and our client has taken over the business. He is delighted with the outcome and can now focus on implementing the changes he needs to achieve his growth plans. This includes upgrading the business into a supplier of high-quality interior design, fittings and furnishings. It will cater for for both industry and domestic use. iBOSS will, of course, be on-hand to provide further help and advice as and when needed. . If he needs further funds to support future growth this can be arranged through our associate company Business Finance Services (www.bufinserv.co.uk).

In conclusion

The directors of iBoss believe the lower end of the business sale market is not well served by some Business for Sale websites. We advise caution when trying to buy a business. Make sure to get professional advice from an accountant, solicitor, corporate finance firm or, dare we say, iBOSS!

If you are looking at acquiring a small business simply contact Phil Jones by e-mailing him at phil@theiboss.co.uk . Alternatively, complete our enquiry form and take advantage of our offer of a free consultation.

We must point out firstly that we, at iBOSS, are not accountants. Nevertheless we reproduce below information from TaxAssist Accountants that we think may be useful to SME owners/managers. It provides information on time-scales for keeping company tax records.

The implementation of digital software such as QuickBooks, Sage & Xero is helping to remove the requirement to keep company tax records . The implementation of MTD by the Government has also helped in this regard. Many SMEs, however, still have a lot of the paperwork used to support their accounts and tax. 

The question is – How long does the business need to keep this paperwork for?

In general terms, the answers are as follows:

Self-employed/partner in a partnership? 

Your tax records must be kept for at least five years after the 31st January self-assessment submission deadline. So, after 31st January 2024 you could dispose of your tax records up to the 2017/18 tax year).  

The records that you should keep for this time include business bank statements, sales and purchase invoices. Also all other documents supporting your accounts and tax records, such as petty cash records. If HMRC checks your tax return they may ask to see the documents. 

Beware, however -If you submitted your tax return late then the requirement to keep records may be longer. 

If the business is VAT registered? 

If your business is VAT registered, you’ll need to keep all VAT records for at least six years. 

Limited company? 

If your business is a Limited Company, you should keep all the tax and accounting records for six years from the end of the accounting period. If your year end is 31st March, from 1st April 2024 you can dispose of records for the 31st March 2018 year. 

Are you an Employer? 

If you’re an employer, you should keep PAYE records for three years from the end of the tax year. 

Paper or digital records? 

If your records are digital, there is no need to print and file these. Simply just keep the digital records safe and backed up. 

If you received the documents physically, then you can keep the records physically. Alternatively you can scan them in and record them with your other digital records. 

If you are uploading documents into your bookkeeping software, or storing them digitally, then you don’t need to keep the records elsewhere. You can dispose of the paperwork. 

Should I keep some records indefinitely? 

Some other records you may want to hang on to for longer. For example, if you’ve purchased a property, it’s important you keep the paperwork. This is in case you need to refer to it when you come to sell the property. Other paperwork relating to the purchase of assets may be needed for a capital gains tax calculation for example. 

It’s recommended that you keep a P60 for at least four years. Payslips, however, can be thrown away two years after the end of the tax year. 

Lost, missing or unreadable records? 

HMRC can charge you a penalty if your records are not accurate, complete or readable. 

If you are missing documents, then try to get replacement documents. Suppliers should be able to issue duplicate invoices. Banks can send copies of statements on request. While your employer or pension provider may not be able to provide you with a replacement P60, they can issue you with a statement of earnings. 

For more information on tax-related matters, follow this link to the TaxAssist web site.

According to The Wealth Club (a retail investment firm) the UK’s top 100,000 taxpayers paid some 24% of all income and capital gains tax in 2021/22. Their average bill was in the region of £559,000. This is up 18% compared with the previous year. The top 100 earners paid an average £46m each. This is up by 14%. According to the Wealth Club income and capital gains tax on the top 100,000 has risen by 45% over the past 5 years.

Interestingly, this is supported by a recent report by PwC. They state that the UK’s largest listed firms saw their overall tax contribution increase to £89.8bn in the last financial year. This is the equivalent to 10% of total government receipts. Their analysis showed that the direct taxes borne by these companies rose by 9.9% to £29.bn. The main contributors to this increase included higher employment taxes and the energy profits levy. Despite this, capital investment from the top 100 firms remained above £25bn. The 100 Group, which employed 1.8m people, paid an average of just over £40,000 per annum to each employee.

The concentration of tax contributions from both top businesses and individuals makes the UK vulnerable to the departure of high-value taxpayers. This is the view of many senior executives.

iBOSS Comment:

The general consensus appears to be that Ministers should work towards creating a simpler and more competitive tax regime. This should be designed to prevent an exodus of big contributors. Simply increasing tax rates is not the solution. Increasing the turnover of UK businesses through incentivisation, which in itself will generate increased tax, is a much better way of growing our economy. Also persuading more UK-based pension schemes to invest in UK businesses rather than overseas ones, would be another positive move!
To learn more about the support and advice the iBOSS Team can provide follow this link. If business finance is what you need then follow this link to our Associate company Business Finance Services .