Can you sell a struggling business?

Struggling businesses are bought and sold every week in the UK. Most owners do not know this, because nobody talks about it. The market prefers clean stories. Advisers prefer strong numbers. So the owner of a business going through a hard patch quietly assumes the answer is no, and carries on alone.

This guide is for that owner. It explains what struggling actually means to a buyer, why waiting usually makes things worse, what a deal tends to look like, and the one situation where you must take professional advice before doing anything else.

We buy businesses. Thriving or troubled. So this is written from the buyer's side of the table, not from a textbook.

Struggling covers more ground than people think. It might mean any of these:

• Turnover has been falling for a year or more
• The business is trading at a loss
• You lost a big customer and have not replaced them
• Debt has built up and the repayments are heavy
• You are exhausted, and the business is drifting because of it
• A key person left and took capability with them that is hard to replace

None of these makes a business unsellable. What they change is who buys it, how the deal is structured, and what it is worth.

A struggling business is not a worthless business. It is a business that needs something its current owner cannot give it right now.

Often that something is capital, shared overheads, fresh energy or simply a different pair of hands.

Almost every owner of a struggling business waits longer than they should. The reasons are human and understandable.

There is hope. Next quarter will be better. The big contract will land. There is pride. You built this, and selling it in a weakened state feels like admitting failure. And there is the sunk cost. You have put years in, so walking away now feels like wasting them.

Here is the uncomfortable truth. A struggling business loses value faster than a healthy one. Every month of decline means fewer interested buyers, a lower price, and less room to structure a deal that works for you. The owner who sells eighteen months before the crisis has options. The owner who calls a buyer three weeks before payroll fails has almost none.

Selling a struggling business is not failure. Liquidating one that could have been sold is the outcome worth avoiding.

When we look at a struggling business, we are not looking at the same things you worry about at three in the morning.

We look at whether there is a real trade underneath the problems. Loyal customers. Skilled staff. Contracts that renew. A reputation in its market. Problems like debt, an expensive lease or a weak sales pipeline sit on top of a business. They are often fixable by a buyer with capital and existing operations, even when they are unfixable for a tired owner with no cash headroom.

A business losing fifty thousand pounds a year can be attractive to a buyer who can remove a hundred thousand of duplicated overhead on day one. That is not clever financial engineering. It is just what happens when a business joins a group that already has accounts, IT, premises and management in place.

So do not decide on the buyer's behalf that your business is not worth buying. That is the buyer's decision, and buyers see things owners cannot.

Be realistic about this part. A struggling business rarely sells for a headline price that makes the local paper. What a good deal does instead is solve your actual problems.

Deals for struggling businesses are usually built from some mix of the following:

• A payment on completion
• Deferred payments over time
• The buyer taking on responsibility for certain debts as part of the deal
• Sometimes an arrangement where you stay on for a period, paid, with the pressure lifted off your shoulders

The right structure depends on what you need. Some owners need debts dealt with more than they need cash. Some need an income for two more years. Some just need out, cleanly, with their staff looked after and their name intact. Say what you actually need. A serious buyer will design around it.

And one promise worth holding every buyer to, including us. If you need a dictionary to read the offer, it is a bad offer.

There is one situation where this guide is not enough, and we want to be straight with you about it.

If your company cannot pay its debts as they fall due, or its liabilities are greater than its assets, it may be insolvent or close to it. At that point the law changes what you must do. Your duty as a director shifts from doing the best for shareholders to protecting the position of creditors. Decisions you make in that window, including a sale, can be looked at very closely afterwards.

If you think you are near that line, speak to a licensed insolvency practitioner before you do anything else. The conversation is confidential, the first one usually costs nothing, and it protects you personally. A sale may still be the right outcome. Businesses are sold out of difficulty, and sometimes through formal processes, in ways that save jobs and trade. But get advice first. Any buyer who tells you to skip that step is not a buyer you should trust.

If you are stressed but solvent, which describes most owners reading this, the rest of this guide applies and time is on your side. For now.

Honesty, mostly. It sounds simple. It is the single thing that makes or breaks these deals.

A buyer looking at a struggling business expects problems. Falling sales, debt, a difficult customer, a warehouse full of slow stock. None of that kills a deal. What kills a deal is finding out late. A tax bill that appears in week six. A dispute nobody mentioned. The buyer stops trusting the numbers, and once the trust goes, the deal usually follows.

So before you talk to anyone, put together an honest picture. Up to date accounts, even if they make hard reading. A complete list of what the business owes and to whom, including HMRC, the bank, suppliers and any personal guarantees you have signed. The problems, written down plainly. You will feel exposed doing this. In practice it does the opposite. An owner who lays out the bad news up front is an owner a buyer can work with quickly.

Most owners of struggling businesses worry about their people more than the money. That worry is a good sign, and it points towards selling rather than closing.

When a business is sold as a going concern, staff normally transfer to the new owner with their employment rights protected under rules known as TUPE. When a business is liquidated, they lose their jobs. A sale, even a modest one, usually protects far more of what you built than closure ever does. The jobs, the customer relationships, the name above the door.

If any of this sounds like your business, three things.

1. Be honest with yourself about the direction of travel. If the last twelve months have been worse than the twelve before, assume the trend continues and act on that basis
2. Get your honest picture together. Accounts, debts, problems, on paper
3. Start a conversation before you need one. Talking to a buyer costs nothing and commits you to nothing. The owners who end up with the best outcomes are almost never the ones who waited

This guide is general information, not financial, legal, tax or insolvency advice. Every business and every sale is different. If your company may be insolvent, speak to a licensed insolvency practitioner. Otherwise take advice from your accountant and solicitor before acting on anything here. Exit Ready UK Ltd, company number 17310523, registered in England and Wales.