How to get max value when selling your business

Ian Lawlor from JPA Brenson Lawlor Chartered Accountants advises The Hardware Journal readers on how to get the maximum possible value from a buyer when selling your business.

No matter what your reasons for selling it’s usually a traumatic time to let go of a business that you have grown and nurtured. It’s like putting a big ‘For Sale’ sign on your baby. One way of lessening the heartache is by getting the maximum possible value from a buyer. It’s amazing how a rub of the green stuff can remove a lot of pain.

At JPA Brenson Lawlor we’re known for how friendly we are, but we also work very hard to cover every angle to make sure our clients get the absolute best price for their business. And because we’re nice we’re sharing some of our top sales tips with HAI members, below.

• Start early. Start thinking about a sale a few years before you intend to sell. If you’re really clever and strategic you should be thinking about selling at the same time you’re buying the business – but realistically, not many do this.
• Due to anti-avoidance tax legislation the seller should minimise cash balances prior to a sale. This is particularly true where either they or the purchaser is considering arrangements where some of the sale proceeds would be paid from the assets of the business.
• Pay yourself a market rate salary for the services that you provide to your business. This is really important when building a pension for yourself and is helpful in maximising the tax-free termination payment that can be paid to you on a sale. Pensions remain one of the few really valuable tax-deductions available. Get pension advice from the very outset.
• Also, get advice about how to structure the sale/ownership of any properties a business may operate from. Depending on requirements, it may be possible to re-organise the corporate structure, splitting the trade from the property. There are tax implications (both good and bad) around these property issues. Creating the right structure can save you substantial amounts of money. This may not be straightforward as you have to accommodate the competing wishes of the purchaser, but that’s part of the bargaining process.
• From a vendor perspective, the main tax will be capital gains tax (CGT), currently at 33%. After the traumatic decade we’ve been through it’s good to know that loss relief may be available in certain circumstances.
• A good marriage can be good for a sale – there are specific reliefs that can apply where a spouse is a part owner of the business or property. Again, get good advice about your corporate structure.
• For individuals aged 55 years or older, retirement relief may be available on the sale of business assets (T&C’s apply). This can prove to be a chunky saving. As usual with the tax code there are complications but explore every avenue to lessen that tax charge.
• Another option is entrepreneur relief, a tax relief that can reduce the tax rate on gains on certain disposals of business assets from 33% to 10%.
• If you’re not ready for retirement, and/or do not want to part with up to 33% of the sale proceeds, you might consider using a holding company structure (this company would sell and receive the proceeds, rather than you personally). This is one of those structures worth considering when you are buying a business – if you are that forward looking.

Ian Lawlor is Managing Partner with JPA Brenson Lawlor, Chartered Accountants. Email ian@brensonlawlor.ie or telephone 01 668 9760.

This Business Support article featured in the July/August 2019 edition of The Hardware Journal.