Selling a business, and getting paid for it
Most advice on selling a business is about finding a buyer. That is the easy half. The hard half is everything between a handshake and the money arriving - a stranger's lawyers going through fifteen years of your paperwork looking for reasons to pay you less, and a set of documents that decide how much of the headline price you actually keep. This is that half, in plain English, written by the people who do it to buyers as well as for sellers.
- The price on the front page is not the money you get. Retentions, earn-outs and warranty claims all sit between the two, and they are negotiated in documents nobody reads until it is too late.
- The work that raises your price happens before the buyer arrives. Unsigned contracts, unassigned intellectual property and a share register nobody has updated since 2019 are all discounts waiting to be found.
- You will be asked to warrant that your business is what you say it is. The disclosure letter is the only thing standing between those promises and a claim - it is the seller's shield, and it is written when everyone is exhausted.
- A buyer's lawyers are running a search for the handful of things that change the price. Knowing what they look for is the whole of your preparation.
- Get tax advice early and separately. The structure that suits the buyer and the structure that leaves you with the most money after tax are not automatically the same one.
The company, or just the good bits
There are two ways to sell, and sellers and buyers want opposite ones.
Sell the shares and you sell the company entire - its contracts, its staff, its history, and every liability anyone forgot about. You walk away clean. Sell the assets and the buyer takes what it wants - the customer list, the equipment, the brand - and leaves you holding a company shell, the liabilities nobody wanted, and the job of winding it up.
You want a share sale. Almost every seller does, and for the obvious reason: it is a clean break, and the risks leave with the company. Buyers know that, which is why they push the other way, and why the structure is one of the first things fought over rather than one of the last.
The tax treatment differs sharply too, and it is frequently the biggest single number in the whole transaction - bigger than the points you will spend weeks arguing about. That is genuinely not our department: get an accountant involved early, before the structure is agreed, because it is very hard to unpick afterwards. A deal shaped for legal convenience and taxed badly is a bad deal.
If you want the same decision seen from the buyer's chair, our due diligence guide sets out why they will push for assets and what they think they are inheriting if they do not.
Everything you never got round to, with a price on it
This is the stage that makes the difference, and it happens before a buyer exists.
Everything you have not tidied up in fifteen years is about to be read by people whose job is to find it. They are not being difficult. Each thing they find is a reason to pay less, ask for an indemnity, or hold money back - and they will find them, because they are looking properly and you have been running a business.
The list is always roughly the same, and it is always boring.
- The share register and the cap table. Who actually owns this company? If the answer involves a spreadsheet, a founder who left in 2018, and some options nobody documented, fix it now. A buyer cannot buy what you cannot prove you own.
- Signed contracts. Not agreed. Signed, by someone with authority, in a file you can find. Your biggest customer relationship running on a two-year-old email chain is a real problem the day someone asks to see it.
- Intellectual property. The most common and most expensive gap in small-company sales: the code, the designs, the brand were made by a contractor, and nothing ever assigned the rights to the company. They own it. Not you. And they will find out you need it.
- Change of control clauses. Go through your key contracts and find out which customers can walk when you sell. That clause is the buyer's leverage and your problem, and consent is far easier to get before a deal is on the table than during one.
- The filings. Companies House, statutory registers, board minutes for things the board apparently decided. Unglamorous, quick to fix now, and awkward to explain later.
None of this is hard. All of it takes time you will not have once a buyer is circling and everyone is working to a deadline. Fixing an IP assignment quietly, a year out, costs a phone call. Fixing it in week three of an exclusivity period costs whatever the contractor now realises it is worth.
Heads of terms are not binding, except where they are
Before the real documents, you agree a short summary of the deal: who, what, how much, when. Heads of terms, or a term sheet. Two things about them matter.
The first is that they are mostly not legally binding, and are not meant to be. They exist to settle the big questions while everyone is still friendly, so the lawyers argue about clauses rather than about price. That is genuinely useful, and skipping them is a false economy.
The second is that parts of them are binding, and those parts are the ones people skim. Exclusivity - a promise not to talk to anyone else for a period - is binding, and it is the moment your negotiating position quietly collapses: you have taken the market away from yourself and handed the buyer a deadline they control. Confidentiality is binding. So is who pays costs if it all falls over.
Non-binding heads still set the anchor. Whatever price and structure you agree here is what everything afterwards is measured against, and every subsequent argument starts from it. It is much easier to move a number before it is written down than after.
Agree the price mechanism here too, not just the number - whether it is fixed against a set of accounts, or adjusted at completion for cash, debt and working capital. That mechanism can move the final figure by more than any clause in the contract.
The disclosure letter is your shield
Now the buyer's lawyers arrive and read everything. Our due diligence guide is the whole of that exercise from their side, and it is worth reading before you are on the receiving end of it - it is, in effect, the buyer's playbook.
Your side of it comes down to two documents that work together, and most sellers understand only one of them.
The warranties are your promises: the accounts are accurate, you own the IP, there is no litigation, the contracts are as described. Dozens of them. Break one and the buyer has a claim against you, personally, after you have sold and spent the money.
The disclosure letter is the answer to them. It lists everything that makes a warranty untrue - the dispute with a supplier, the customer who has given notice, the IP you are still chasing an assignment for. And here is the rule that decides everything: whatever you properly disclose, you cannot be sued on. The warranty covers only what you did not tell them.
Which turns disclosure from an admin task into the most valuable hours of the whole sale. Every problem written down clearly is a problem that can never come back. Every one left out, because it felt small or because someone hoped it would not matter, stays live for years - and buyers do go looking afterwards.
So disclose generously and specifically. "The company has had disputes from time to time" protects nobody. The actual dispute, named and dated with the documents attached, protects you completely.
The headline price is not the money
You agreed a price. It is the number you tell people. It is not the number that reaches your account, and the gap between the two is where sellers get the sharpest education of their lives.
So negotiate the shape, not just the size. A lower headline with more of it in cash on completion is very often the better deal, and it is almost never the one that gets celebrated.
If there is an earn-out, the protections around it matter as much as the number: how profit is defined, what the buyer can and cannot do to the business during the period, what happens if they sell it on or restructure it, and what you can actually see of the accounts. An earn-out with no protections is a wish.
Then read the restrictive covenants before you sign. You will be promising not to compete, not to poach your own former staff, and not to approach your own former customers, for a period. That is normal and usually enforceable in a sale. It is also, for a founder in their forties, a decision about what they are allowed to do next - and it deserves more than the ten minutes it usually gets at the end.
We do this to buyers as well
Most of what makes this guide useful is that Silva sits on both sides. We run legal due diligence for buyers - the whole data room read, every red flag ranked, the missing documents chased - and we know exactly what that exercise finds, because we run it.
Which means the preparation advice in stage two is not general good practice. It is the actual list of things that get found: the IP with no assignment, the material contract that turns out to be a two-page letter from 2014, the schedule of key agreements that says "available on request". You can read the buyer's version of this guide and see precisely what will be done to you.
Sellers who prepare against that list do not just avoid discounts. They shorten the process, which matters more than it sounds: every extra week of diligence is a week for the buyer to find something else, get cold feet, or renegotiate. A clean data room is not tidiness. It is price protection and it is speed.
And if the deal involves share options - employees who expect to see something on exit - that is its own piece of work, worth sorting before completion rather than during. Our writing on employee share schemes covers what those arrangements actually do when a company is sold.
Frequently asked questions
How do I sell my business?
Broadly: decide whether you are selling shares or assets, get your paperwork in order before a buyer looks at it, agree heads of terms covering price and structure, go through the buyer's due diligence while disclosing properly against the warranties you give, then sign and complete. The legal work concentrates in the middle - preparation and disclosure are where the money is won or lost.
How long does it take to sell a business?
From heads of terms to completion, commonly three to six months, and longer if the paperwork is untidy. Finding a buyer and agreeing a price can take far longer than that. The single biggest thing under your control is preparation: a business whose contracts, share register and IP are in order moves through diligence in a fraction of the time.
Do I need a lawyer to sell my business?
For anything beyond the smallest asset sale, yes - because you will be giving personal warranties that survive the sale, and the disclosure letter that limits them is a technical document with real money attached. The buyer will certainly have advisers. The asymmetry is the risk, not the fee.
What is a disclosure letter?
It is the seller's letter setting out everything that makes the warranties in the sale agreement untrue or incomplete. Its effect is decisive: a buyer cannot bring a warranty claim about something that was properly disclosed. So it is not an admission of weakness - it is the document that protects you, and the more specific it is, the better it works.
What is an earn-out?
Part of the price, paid later, only if the business hits agreed targets after the sale - typically over two or three years while the buyer runs it. It bridges a gap in what each side thinks the business is worth. It is also the part sellers most often over-count: your payment depends on someone else's decisions, so the definitions and protections around it matter as much as the headline figure.
Start before the buyer does
The cheapest hour in a sale is the one spent a year early, fixing the things a buyer would otherwise find and charge you for. Silva prepares businesses for sale, and runs the diligence for the people buying them - so we know exactly what is coming.