Selling Your Business: What I've Learned from Both Sides of the Table

Ased Iqbal

Business owner and acquisitions director

I've spent more than 30 years building, owning, operating, acquiring and selling businesses.

During that time, I've also reviewed more than 1,000 acquisition opportunities. Some were excellent businesses with sound fundamentals. Others looked attractive initially, but the closer we examined them, the more complicated the picture became.

One thing I've learned is that selling a business is rarely as straightforward as agreeing a price.

There's the business the owner believes they're selling, the business the buyer thinks they're acquiring, and the business that emerges during due diligence.

The closer those three versions are to one another, the better the prospects of completing a satisfactory transaction.

If you're thinking about selling your business, I'd like to share some of the things I consider important, drawing on my experience on both sides of the table.

I've been through the selling process myself

One of my previous ventures involved developing and operating Scotland's first easyHotel, in Edinburgh.

We worked hard to establish the business, build direct customer relationships and reduce our dependence on third-party booking intermediaries.

It didn't happen overnight, but the approach worked. The business achieved profit growth year after year until I eventually sold it.

That experience reinforced something I've believed for a long time.

The quality of a business isn't measured by profitability alone. How those profits are generated, how dependable they are and what the business relies upon to produce them matter enormously.

I've also owned and operated businesses across wholesale, distribution and other sectors, each with different operating characteristics and financial challenges.

So I understand the owner's perspective. A business may represent decades of work, personal sacrifice and financial commitment.

But I also understand the buyer's position.

A buyer isn't purchasing the years you've worked or the sacrifices you've made. They're acquiring a business that must continue operating, generating cash and meeting its obligations after you've left.

Both perspectives are legitimate. The challenge is finding terms that work for both parties.

Before discussing value, understand what you want to achieve

Not every owner sells for the same reason.

Some want to retire completely. Others have grown tired of the responsibility or feel they've taken the business as far as they reasonably can.

Some would prefer to release capital while retaining a shareholding and remaining involved.

And sometimes a business needs investment, additional management or resources that the owner no longer wishes to provide.

These circumstances call for different approaches.

A complete sale may be appropriate. A partial acquisition or phased transition might be preferable. In other cases, retaining the business for another few years could be the better decision.

I've encountered owners who are comfortable remaining involved and others who want a clean break.

The right transaction isn't necessarily the one with the highest headline price. It's the one that achieves the owner's objectives on terms that are realistic and deliverable.

That distinction is worth establishing before negotiations begin.

What is the business actually earning?

This is usually one of my first questions when examining an acquisition.

I don't like relying on a single year's accounts.

An exceptional year can flatter a company's performance, just as a difficult year can obscure the underlying strength of an otherwise sound business.

I want to understand the trading history, the movement in margins, the overhead structure and whether recent performance is sustainable.

Then there are the adjustments.

An owner may incur discretionary expenditure through the business. There may be exceptional professional fees, unusual costs or remuneration arrangements that won't continue under new ownership.

Those adjustments may be perfectly reasonable, provided they're properly supported.

But there is another side to the calculation.

Suppose the owner receives £100,000 a year and personally manages the major customers, estimates contracts, supervises employees and deals with operational problems.

It would be misleading to add back the entire £100,000 and assume the responsibilities simply disappear following a sale.

Somebody will have to do that work.

If a replacement manager costs £70,000, for example, that ongoing cost must be considered when assessing sustainable profitability.

I have seen adjusted earnings presented in ways that make a business appear considerably more profitable than it could realistically be under independent management.

What interests me is maintainable profitability: what the business can reasonably be expected to earn after allowing for the actual cost of operating it.

That's a far more useful basis for valuation than taking the most flattering EBITDA figure available.

The balance sheet often tells a different story

I've reviewed businesses where the profit and loss account looked perfectly respectable, but the balance sheet raised considerably more questions.

Substantial debtor balances, unusual creditors, director loan accounts, intercompany transactions and financing arrangements can all affect the acquisition.

And a healthy bank balance doesn't necessarily mean the company has surplus cash.

Consider a contractor that has received advance payments for work it has yet to complete.

The money may be in the bank, but the company still has to pay for the labour, materials and other costs necessary to deliver the work.

Treating all that cash as available to distribute to shareholders would be a mistake.

Cash in the bank and surplus cash are not necessarily the same thing.

The reverse can also happen.

A company may be profitable and hold substantial trade debtors, yet have very little cash available to meet its immediate obligations.

That doesn't necessarily make it a bad business, but it tells us something important about how the company is financed.

I often find that the headline accounts are only the beginning. The underlying schedules, movements and explanations matter just as much.

For an owner preparing to sell, being able to explain those balances clearly can make a considerable difference when due diligence begins.

Working capital isn't just an accounting adjustment

This is an area I spend a great deal of time examining.

Every business needs sufficient working capital to operate.

Employees must be paid, suppliers settled and overheads met, often before customers pay their invoices.

The amount required depends on the business model, debtor and creditor cycles, seasonality, contractual arrangements and historical trading patterns.

I've examined businesses that appeared to have substantial net current assets, only to find that the underlying position required much closer investigation.

How collectible are the debtors? Are there contractual retentions, disputes or overdue accounts?

Is stock readily saleable?

Does the company rely heavily on extended supplier credit?

Are customer receipts funding work that hasn't yet been completed?

These questions matter because the business must continue trading after the sale.

The buyer needs to understand how much working capital must remain in the company for it to operate normally.

The seller, meanwhile, needs to understand why a working-capital adjustment is being proposed and whether it is justified.

Neither party should simply accept an arbitrary figure.

This is one reason I favour examining actual historical balances and cash movements rather than relying on a broad assumption.

A properly established working-capital requirement can prevent significant disagreements over the final purchase price.

Enterprise value is not the amount you necessarily receive

Suppose a buyer and seller agree an enterprise value of £750,000.

That establishes the value of the underlying business on an agreed basis, but it doesn't necessarily determine the value of the shares.

We still need to consider surplus cash, borrowings, debt-like liabilities and working-capital adjustments.

Take a simplified illustration:

The precise treatment of these items depends on the transaction and the agreed definitions. Care is also needed to ensure liabilities and adjustments aren't counted twice.

Now suppose £150,000 of the consideration is deferred.

The initial payment to shareholders might be £550,000, with the remaining amount payable under the agreed terms.

We therefore have three different figures:

£750,000 enterprise value. £700,000 equity value. £550,000 payable at completion.

All three can be correct.

That is before considering the seller's individual tax position, transaction costs or any other agreed completion deductions.

Understanding these distinctions early is important. Otherwise, an owner may become attached to a valuation figure that bears little resemblance to the money they'll actually receive at completion.

What exactly is the buyer acquiring?

It sounds like an obvious question, but it isn't always straightforward.

Privately owned businesses sometimes operate through several companies. Property may be held separately from the trading operation. Assets may be shared, and intercompany balances may have accumulated over many years.

I've encountered situations where considerable work was necessary simply to establish which entity owned particular assets, employed the staff or carried specific liabilities.

Director remuneration and related-party arrangements can raise further questions.

If the company occupies premises owned personally by the shareholder, what happens following a sale?

Will the buyer acquire the property, enter into a lease or relocate the business?

And what would a reasonable ongoing property cost look like?

These aren't minor details.

They can materially affect maintainable earnings, funding requirements and the structure of the proposed acquisition.

Before a buyer can sensibly price a transaction, there needs to be clarity about exactly what is being purchased.

An owner who resolves these matters before going to market will generally be better prepared for serious negotiations.

A buyer has to fund the purchase and keep the business running

This is something I think is often underestimated.

It's possible to agree a reasonable valuation and still struggle to construct a financially workable acquisition.

A buyer may have access to bank borrowing, invoice finance, asset-backed funding or other facilities.

But those facilities have limitations, costs and repayment obligations.

And financing the purchase is only part of the requirement.

The business itself may need cash for working capital, equipment replacement, seasonal fluctuations or growth.

When I examine an acquisition, I don't stop at the purchase price.

I want to understand the projected cash flows after completion.

Can the business service the borrowing? Is there sufficient liquidity during the weakest trading months? Can deferred consideration realistically be paid from available cash flow?

What happens if a major customer pays late, margins fall or an unexpected capital expenditure requirement arises?

A transaction that appears affordable on completion day can become financially uncomfortable six months later.

This is why funding and cash-flow forecasting are integral to how I assess acquisitions.

For a seller, the lesson is equally important.

A credible offer is one thing. A buyer with a credible route to funding and completing the purchase is another.

Deferred consideration needs careful thought

Not every business sale involves the full purchase price being paid immediately.

A transaction might include deferred consideration, vendor finance, retained shares or an earn-out linked to future performance.

These arrangements can be useful.

They may help bridge a valuation gap, make funding more manageable or allow the seller to participate in future growth.

But the commercial risks need to be understood.

Suppose an owner receives an offer of £900,000, with £500,000 payable at completion and £400,000 payable later.

The second amount deserves just as much scrutiny as the first.

When is it payable? Is payment unconditional? Is there security? What happens if the purchaser encounters financial difficulties?

An earn-out introduces further questions.

How will performance be measured? Who controls expenditure? What happens if the buyer changes the management structure, allocates additional overheads or invests heavily in expansion?

If the seller retains a minority shareholding, what rights and protections accompany it?

I've spent considerable time considering these arrangements because a transaction structure has to be workable for both parties.

£1 received at completion is not commercially equivalent to £1 that may or may not be received several years later.

A sensible structure can help complete a transaction that might otherwise be impossible.

A poorly defined structure can create years of disagreement.

Can the business operate without you?

This is one of the most important questions I consider.

I've looked at businesses with established customers, long trading histories and attractive profitability where the owner remains central to almost everything.

They price the work, manage the employees, maintain customer relationships, deal with suppliers and resolve the problems.

That may have worked very well for 25 years.

But what happens when they leave?

A buyer needs confidence that the business will continue operating successfully following the change of ownership.

A capable second-tier management team can make an enormous difference.

Where that management structure doesn't exist, the buyer may need to recruit additional people or agree a transition period with the seller.

Both have commercial implications.

A business that depends entirely on its owner is a different proposition from one with established management and systems capable of operating independently.

If you're considering retirement in the next few years, reducing that dependence may be one of the most valuable improvements you can make.

It's not simply about achieving a better valuation. It's about making the business easier to transfer and giving yourself more options.

Heads of terms are progress, not completion

I've worked on transactions where commercial terms were negotiated, agreement was reached and heads of terms were signed, only for the acquisition to fall apart later.

It happens, sometimes for reasons that weren't apparent at the outset.

Financial information may not withstand closer scrutiny. Lenders may be unwilling to support the proposed funding structure. Legal due diligence may uncover an issue that materially changes the risk.

Sometimes the parties discover that they understood the original agreement differently.

And sometimes circumstances change, or an owner has second thoughts.

For somebody who has spent decades building a business, selling can be an emotional decision as well as a financial one.

This is why I believe in identifying difficult issues as early as possible.

I'd rather establish that a transaction isn't workable before both parties have incurred substantial professional fees than spend months pursuing an acquisition with little realistic prospect of completion.

The objective isn't merely to agree a price. It's to structure a commercially sensible transaction that both parties can actually complete.

That requires realistic expectations, proper information and a willingness to address difficult matters rather than avoid them.

Do you need a business broker?

Not necessarily.

There are circumstances where a competent broker or corporate finance adviser can add considerable value.

A properly managed competitive sale process may produce a stronger outcome, particularly where several credible buyers could be interested.

An experienced adviser can also help prepare information, manage negotiations and coordinate the transaction.

But not every owner wants to put their business on the market.

Some prefer an initial confidential discussion with a potential acquirer, particularly where there is a natural strategic fit.

Both approaches have their merits.

I wouldn't suggest that selling directly always produces the best price. Equally, appointing an intermediary doesn't guarantee a successful transaction.

My view is that owners should understand their options and decide which route suits their objectives and circumstances.

Whichever approach you choose, independent legal and tax advice remains important.

Sometimes the best preparation is simply to build a better business

I don't believe in dressing up a business for sale.

If earnings are inconsistent, financial reporting is unreliable, working capital is poorly managed or the company depends too heavily on its owner, those issues deserve attention whether a sale is planned or not.

Improving them can strengthen profitability, reduce risk and make the company easier to operate.

It also gives the owner more choices.

You might decide to sell completely, retain a shareholding, bring in a management successor or continue running the business for another five years.

I've seen first-hand how much work can be involved in creating a business with dependable earnings, strong customer relationships and less reliance on outside parties.

But that work can produce lasting value.

My preference has always been to build a sound business first. If you eventually decide to sell, the business should be capable of standing on its own merits.

Considering selling your business?

My acquisition interests are primarily in established businesses with sustainable earnings, sound underlying fundamentals and realistic prospects for continued operation following a change of ownership.

I'm particularly interested in situations involving retirement, succession, partial exits and opportunities where there may be a sensible strategic or commercial fit.

Not every business will be suitable, and not every conversation needs to lead to a transaction.

I undertake acquisition work in different capacities, including personally and as Acquisitions Director of IBG Group. Where an opportunity is being considered, I would make clear which capacity I'm acting in and any relevant commercial interests.

If you're thinking about selling your business, or simply beginning to consider your options, you're welcome to get in touch for an initial confidential conversation.

There's no obligation to proceed.

You can also explore my Deal Match assessment to see whether your business might fit the type of acquisition or partnership opportunities I consider.

If you're at an earlier stage and thinking about retirement or succession, Legacy Secured Exit provides practical, independent guidance on preparing for that transition.

For owners exploring the financial value of their business, ValuSuite provides free valuation and transaction-analysis tools.

Selling a business is a significant decision. It's worth understanding what you're selling, what a buyer is likely to consider and what you actually want to achieve before entering into negotiations.

About the author

Ased Iqbal has more than 30 years of commercial experience spanning business ownership, development, acquisitions and disposals.

His background includes hospitality, wholesale, distribution, manufacturing and other sectors. He has reviewed more than 1,000 acquisition opportunities and holds the FMVA® and CBCA® designations.

He currently serves as Acquisitions Director of IBG Group.

This article reflects personal commercial experience and provides general information. It is not individual legal, tax, investment or valuation advice. Transaction values, structures and outcomes depend on the circumstances and agreed terms.