What You Need To Know Before Selling Your Business

No matter how desperate you may be to sell your business, this is not a process that can be rushed. Every business sale requires a lot of preparation and consideration. The last thing you want to do is sell your company, which you have worked so hard on, to the wrong person or for the wrong price. With that being said, read on to discover some of the key things you need to know before you sell your business.

Expect to answer a lot of questions – There is only one place to begin, and this is with the plethora of questions that are going to come your way. You need to be prepared to answer a shed load of questions if you are selling your business, especially if your company is run completely online, which is becoming more and more popular in the current day and age. Do not judge a buyer for asking you these questions and do not get frustrated with them. Put yourself in their shoes. This is a big sale and a big commitment. They need to make sure they know the ins and outs of what they are letting themselves in for.

Buyers are not going to pay more for potential – A lot of business owners make the mistake of thinking that they have a potential gold mine on their hands and so this means that they are going to be able to make a fortune off the sale of their business. Unfortunately, it does not work like this. Perceived potential alone is not enough to command a high selling price. If you do not have a proven revenue stream, where is the value going to be? The vast majority of your buyers do not want potential, they want something that is already proven and established.

Olu Eletu
There are many costs to take into account – There are so many different costs that you need to take into account when selling your business. This is why it is vital to draw up a financial plan so that you can effectively budget for all of this. This includes everything from the tax on sale of shares to securing legal assistance for the handling of the transaction.

Be honest – Last but not least, the importance of being honest cannot be stressed enough. If you bend the truth or avoid it, you are always going to end up experiencing bigger issues later down the line when the truth surfaces, which it will. If you are transparent and honest from the very beginning, there is less chance of the deal going sour because the buyer has uncovered something while carrying out due diligence.

As you can see, there is a lot that needs to be considered and taken into account when selling a business. If you take note of everything that has been mentioned above, and you follow a careful and considered approach, you can make sure that your business sale goes as smoothly and successfully as possible.

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Common Company Formation Mistakes to Avoid

If you have decided that you are going to form a company, there is a lot that needs to be considered. Needless to say, you will want your company to be a rousing success, and there are many elements that need to come together to make sure that this is the case. Firstly, you need to make sure that you form your company correctly to begin with. With that in mind, read on to discover some of the most common company formation mistakes that you need to avoid…

Typos – There is only one place to begin, and this is with typos! You are probably thinking that you would never be stupid enough to include typos in your application. Well, you would be surprised by how many people make this mistake. In fact, typos and misspellings are one of the most common errors made when supplying data to Companies House. This is relatively easy to fix, but you could end up needing to pay a fine to do so.

Issuing too many shares – Another common company formation mistakes is issuing too many shares. The vast majority of businesses formed have a small nominal amount of shares that have been issued at the time of corporation. For instance, a business that is owned by one person only may be registered with just one single £1 share. This is usually the way people go about it. However, there have been cases whereby people have issue a million £1 shares to a shareholder. They think this is a smart move, however, it is usually not advised. This is because you are heightening your liability of the shareholder, and so you need to think about how these shares are going to be accounted for or paid for. There is no simply fix when you create too many shares either, as this is not something that can just be reversed, so this is definitely a mistake you need to avoid to begin with.  

Incorrect supporting data – When it comes to company formation in the UK, you will be required to provide a number of documents that supports your application. This is where a lot of new business owners go wrong. They do not supply any data to go with their application, or the data they do supply is insufficient. When this happens, all you are doing is drawing out the process. It is best to supply as much data as possible.

Matthew Henry
Failing to register for corporation tax – As a business in the UK, there are a number of different taxes that you are going to be required to pay. One of these taxes is corporation tax, which is a tax on your profits. If you decide to start a private limited business, you must register for this type of tax within three months of forming your company. If you do not do this, then by law, you are not able to begin trading legally. What if you do not earn enough to ever pay corporation tax? Well, you still need to be registered for it!

Forming a limited by shares business instead of a not-for-profit company – If you are trying to launch a not-for-profit organisation, you need to register it as this, rather than a limited by shares business. A lot of people do the latter, but this means you have the intention of making a profit, so it is the wrong type of company. Moreover, you cannot swap between the two types of businesses, so you would actually need to strike off or dissolve the business you first registered, and then register a new business as a not-for-profit organisation.

Issuing shares to all directors – A lot of businesses have directors that are also shareholders. If this is the case, it is vital to separate the running of the business as a director from the owning of a business as a shareholder. A shareholder has rights within the business. These are the rights that are detailed by the Companies Act 2006. They can also profit from the sale of the company, receive distribution of profit by dividend, and they have voting rights at meetings. This is why you should only ever issue shares to people that you intend to ‘own’ a share in the company.

Appointing directors that are not the right age – This is something that a lot of parents tend to do when they are establishing their business. They want their daughter or son to be involved, and so they will put them as a director of the business. However, all company directors in the UK need to be at least 16-years-old. Your application will be rejected if you attempt to put a director that is not of legal age.

Choosing the wrong company address – Last but not least, your business address is more important than you probably realise. Whenever there is official communication between you and the UK government, this will be sent to the address in question. You can use your home address if this is more suitable. You do not need to choose the offices that you are operating your business out of. The only restriction is that it must be a physical address, it cannot be a virtual one, and it does need to be in the home country of the company.

As you can see, there are a lot of mistakes that business owners make when it comes to company formation. If you can avoid these errors when you are forming your business, you can give yourself a great chance of getting off to a smooth start. Good luck!

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How much do road works cost a business?

Us British drivers are very familiar with roadworks and temporary speed limits up and down the country — and the majority of drivers are aware of the frustration it can cause. For some businesses who rely on the roads to get from job to job, roadworks and temporary speed limits can really slow down their progression. This means that they are extremely limited to how much they can get done in a working day as they need to factor in additional time for traffic and disruptions caused by roadworks and temporary speed limits.

Did you know that in 2016, there were over 1.35 million traffic jams across the UK, which cost the economy approximately £9 billion according to Inrix. November 2016 marked the worst month of the year for the number of traffic jams, with over 169,000 recorded across the country – 50% worse than the average number. But how does this effect businesses who rely on the British roads? Long term van hire specialists, Northgate Vehicle Hire  have investigated.

Yes, some traffic jams are unavoidable. Accidents happen, and when they happen on the roads, a traffic jam naturally follows – but there is of course traffic that could be avoided. A significant amount of traffic jams are caused as a result of road works and temporary speed limits, which is why the Local Government Association (LGA) have been calling for action by the government to limit the amount of road works that are carried out across the country, to reduce the risk of gridlock. Whilst it is also causing unnecessary carbon emissions and fuel, it also wastes a lot of drivers’ time – even more valuable time for those who are working between different locations.

Apparently the average driver reportedly spends around 32 hours a year stuck in traffic jams during peak periods – this figure doesn’t necessarily account for drivers who drive for a living, and are on the roads the majority of the day or night. For businesses which charge their customers an hourly rate, that is a loss of at least 32 hours of work – if you charge £15 an hour, that would be around £480 annually per employee. If you run a business of 15 employees, that is a minimum annual loss of £7,200 as a result of wasted time stuck in traffic.  

There are currently  2.5 million road openings each year which are caused by utility company digging – and this meansthree quarters of small businesses say the road works have a negative impact on their business as a result – whether it is wasting valuable time in traffic, reducing sales or loss of earnings. It is no wonder road works cause such chaos on the roads when utility works supposedly reduces road life by at least a third, and when temporary speed limits are also set in place, the overall flow of traffic on the road becomes slower. If government figures are to be believed, the state of UK roads and traffic jams are only to get worse – traffic levels are expected to increase by around 55% by 2040.

Looking at the regions across the UK that are most likely to be affected by traffic jams and road works, businesses in Belfast are the ones who should worry the most about the cost impact of road works and traffic jams. In 2015, average congestion on the roads was at 40%, meaning businesses lost around 24 working days per vehicle per year. Overall, Belfast businesses experience around £12,673,050 cost as a result of road congestion. The remainder of the UK’s 10 most congested cities and towns rank as followed, according to CityAM.com:

Rank City/Town Average Congestion Working days lost per vehicle per year Cost to business
1 Belfast 40% 24 £12,673,050
2 London 38% 19 £237,196,080
3 Manchester 37% 21 £157,729,390
4 Edinburgh 37% 20 £13,338,360
5 Brighton 34% 16 £9,334,440
6 Hull 33% 19 £13,646,560
7 Bournemouth 32% 17 £7,959,600
8 Newcastle 31% 16 £7,519,410
9 Bristol 31% 17 £43,733,580
10 Sheffield 30% 16 £20,397,480

 The director for TomTom Telematics in the UK and Ireland, Beverley Wise commented: “Making the most of billable time is key to profitability for any business, so organisations that rely heavily on a mobile workforce must look for ways to maximise the time employees spend actually doing jobs by minimising time spent on the road.”

However, if forecasts are correct and traffic levels do continue to rise across the UK, it looks like businesses could be faced with a significant loss.

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