Strategic Transformation & Planning
Business Strategy & Planning
A Guide to Buying and Selling a Business in the UK: Steps, Costs, and Key Concepts
Your essential guide to the UK process, timelines, valuation methods, due diligence, and all-in costs for both buyers and sellers.
This guide provides an essential overview of the process, timeline, costs, and critical concepts for anyone looking to successfully navigate the market of buying or selling a business in the UK.
1. What are the basic steps to Buy a Business in the UK?
Buying a business involves several key stages:
Identification: You'll identify potential businesses that match your criteria. This might involve searching online marketplaces, working with business brokers, or networking within your industry.
Evaluation and Offer: You'll evaluate opportunities by reviewing basic financial information and meeting with sellers. When you find a business you're interested in, you’ll make an initial offer.
Due Diligence: If your offer is accepted, you conduct “due diligence”—a detailed investigation to verify everything the seller has claimed.
Legal & Negotiation: You’ll negotiate and sign legal agreements with help from solicitors.
Completion: Finally, you complete the transaction, transferring money and taking ownership.
The entire process typically takes 3-6 months, though it can vary based on the business's complexity.
2. What are the basic steps to Sell a Business in the UK?
Selling your business follows a similar but reverse journey:
Preparation: You prepare the business for sale by getting financial records in order, addressing any obvious problems, and making the business as attractive as possible.
Valuation & Pricing: You value your business and decide on an asking price, often working with advisors to help with this.
Finding Buyers: You’ll find buyers by listing the business publicly, working with a broker, or approaching specific buyers privately.
Negotiation & Due Diligence: When you receive offers, you’ll negotiate terms and allow serious buyers to conduct due diligence on your business.
Completion: You complete the legal process with solicitors and transfer ownership to the buyer.
Like buying, this typically takes 3-6 months from the point you actively begin marketing the business.
3. How long does it typically take to buy or sell a business?
The timeline for buying or selling a business in the UK varies considerably:
Business Value | Typical Timeline | Complexity |
Under £1 million (Smaller) | 3–4 months | Usually simpler with less complex due diligence. |
£1–10 million (Mid-sized) | 4–6 months | Expect more financial review, legal complexity, and stakeholders. |
Over £10 million (Larger) | 6–12 months or longer | Involves extensive due diligence, complex negotiations, and detailed legal agreements. |
A well-prepared seller with organised records can save weeks, while complications discovered during due diligence or financing delays can add months.
4. What does “Business Valuation” mean?
Business valuation is simply the process of determining what a business is worth in monetary terms. Unlike a house, a business doesn’t have a single, objective value, but rather a range of potential values depending on several factors.
Common Business Valuation Methods
Method | Description | Relevance |
Asset-Based Approach | Adds up everything the business owns (equipment, property) and subtracts what it owes. | Often gives the lowest valuation; most relevant for businesses being sold for their assets. |
Earnings-Based Approach | Looks at how much profit the business generates and multiplies that by an industry-based "multiple". | The most common method for profitable, operating businesses. |
Market-Based Approach | Compares your business to similar businesses that have recently sold. | Works well when good data is available on comparable sales. |
Professional valuers may use a combination of these methods to arrive at a fair value range.
5. What is Due Diligence in simple terms?
Due diligence is the process of thoroughly investigating a business before you buy it. It ensures you’ve taken reasonable steps to verify what you’re buying.
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During due diligence, you'll examine:
Financial Records: Profit and loss statements, balance sheets, tax returns, and bank statements—typically for the past three years. You are checking that the business actually makes the money the seller claims and that there are no hidden liabilities.
Legal Matters: Contracts, employment agreements, property leases, and any ongoing disputes or litigation. You want to ensure the business has the right to operate and that you won’t inherit legal problems.
Operational Aspects: Key customer relationships, supplier arrangements, employee roles, and any intellectual property.
For larger transactions, you’ll typically hire accountants, solicitors, and other specialists to conduct formal financial due diligence, which can take several months.
6. What is an Earnout and when would I use one?
An earnout is a way of structuring a business sale where a part of the purchase price is paid later, based on how the business performs after the sale.
Earnouts are useful in several situations:
Disagreement on Value: It allows the buyer and seller to meet in the middle if they disagree on the initial business valuation. The seller gets the chance to prove the business is worth more.
Uncertain Future Performance: If the business is in a rapidly changing market or relies heavily on key contracts, an earnout ties payment to actual results rather than projections.
Incentivising Seller Involvement: It incentivizes the seller to stay involved and help the business succeed during the transition, especially if success depends heavily on the current owner's expertise.
7. When should I start planning to sell my business?
The ideal time to start planning your exit is 3–5 years before you actually want to sell. Early preparation is key to maximizing your business's value:
Building Systems: Buyers pay premium prices for businesses that run smoothly without the owner's constant involvement. It takes time to build systems, train managers, and delegate responsibilities.
Financial Performance: Showing three years of consistently growing profits commands a much higher price than if you have erratic results.
Value Enhancement: Improvements like diversifying your customer base or resolving legal issues take years to implement.
Tax Planning: Proper UK business sale tax planning is crucial. Strategies like Business Asset Disposal Relief require specific conditions that take time to satisfy.
8. What are the total costs involved in buying a business?
Buying a business involves several costs beyond the purchase price. A rough estimate is to budget 5–10% of the purchase price for transaction costs.
Cost Category | Typical Range | Details |
Professional Fees (Solicitors) | £5,000–£50,000 | Varies depending on deal complexity. |
Due Diligence (Accountants/Specialists) | £5,000–£15,000 (Small); £20,000–£100,000+ (Mid-market) | Covers financial, legal, commercial, or technical due diligence. |
Financing Costs | 1–3% of the loan amount | Arrangement fees for business acquisition loans. |
9. What are the total costs involved in selling a business?
For a sale, budget 5–12% of the sale price for transaction costs.
Cost Category | Typical Percentage/Range | Details |
Broker or Corporate Finance Fees | 5–10% of sale price (smaller deals); 2–5% (mid-market) | Typically the largest expense; many advisors charge a retainer plus a success fee. |
Solicitor Fees | £5,000–£50,000 | For drafting the sale agreement and handling legal negotiations. |
Accountant & Tax Advisor Fees | £3,000–£20,000+ | Preparing records and specialized UK business sale tax planning. |
Good business sale advisors often increase your sale price by more than their fees through better positioning and negotiation.
10. Do I need professional advisors or can I do this myself?
While you can legally buy or sell a business without professional help, for most transactions, professional advisors are essential.
Solicitors: Non-negotiable for any business purchase or sale. Business transactions involve complex legal agreements, and a mistake could cost far more than their fees.
Accountants: Provide crucial value by verifying financial information, performing due diligence, and helping structure the deal tax-efficiently.
Brokers/M&A Advisors: Help sellers find buyers, market the business effectively, and often increase sale prices through proper positioning.
Good advisors typically pay for themselves through: higher sale prices (or lower purchase prices), better deal terms and protection, and avoiding costly legal mistakes. Most experienced buyers and sellers consider them an investment.