Selling a company for the price and on the terms that you want will never be as straightforward as you would hope. To get your business sale ready you’ll likely need rising profits and great systems in place. These, of course, will usually only be realistic goals if you have been able to attract and motivate a great team.

Whilst you may already have a good idea about what you want out of a business sale (for example the sum you need to be able to retire or the terms on which you will want to work (if at all!) after completion) you also need to think about your team. They will be just as important to any buyer of your business.

Here are our top 5 tips:

1. Look at all the options available to you

So let’s assume you’ve got that great team, rising profits, and processes and systems in place. If the market is right (and timing can be everything) selling to a third party could be a good way to exit your business. The buyer will, though, want to ensure that your team are going to stick around even if you aren’t. A share incentive could be key to keeping them motivated to work for a new boss.

And don’t forget: your team might well be the best buyer for your business. Yes it is likely that they have no money but if they are good enough it may not be such a mammoth task to raise the funds. Often it could be more motivational (for you as well as your team) to structure a management buy-out so that you are paid off out of the future cash/profit of the business. This could be the stepping stone that would see you together grow the business to the next level (at which stage a more attractive trade sale might then be on the cards).

2. What about your team?

Failing to recognise and appreciate the contribution of your team members could be disastrous when it comes to succession planning. But this is easy to do as no doubt you are busy with the day to day running of the business as well as planning for its growth.

So how could you motivate those people and lock them in to help you push the growth of your business and come to a point which allows you to exit? Whilst a pay-rise and bonus may work in the short-term, this may not be sufficient as a long term plan. New rewards and challenges through an employee share scheme could be key.

3. When should I seek advice from a professional?

The short answer? As soon as possible. The advice you receive may well surprise you (and not always in a positive way!).

The right adviser will be able to give you an honest assessment of where you and your business are now. This can be vital in ensuring that you plan far enough ahead to get your business sale ready.

4. So what about a share scheme?

If you think that a vendor-funded MBO may be an option, you may well conclude that the employees should receive “zero cost” options under the Enterprise Management Incentive scheme.  To avoid any tax issues for the team, you might need to consider reorganising the share capital of the company to achieve a low valuation for the team’s shares. This can be done with preference or growth shares. You’ll need to think the scheme through with your advisers to make sure that everyone is aware of what happens if, say, a team member leaves after they have received some initial shares.

5. Communication

An employee share scheme that is not communicated properly to your team will not be understood.  You will need to design this, with your advisers, with your exit plan in mind. Without credibility, the plan will not be motivational. You will want your advisers to help you present the plan and be available to answer any questions that your team may have.

For further information please do not hesitate to contact an Everyman Legal Solicitor on 01993 893620 or email everyman@everymanlegal.com