Closing your business down, deliberately
When winding down is the better answer, what it actually involves, and what the money looks like when you do it properly.
Not every business should be sold. Some should be closed, on purpose, while they are still solvent and while the owner is still the person making the decisions.
That is not a failure. A solvent closure in which everybody is paid, the assets are sold and the owner keeps what remains is a legitimate outcome and sometimes a better one. It is faster, it is certain, and it does not depend on finding a buyer who may not exist.
We are a valuation and advisory business. We earn nothing if you close. We are publishing this because the alternative, an owner spending two years and a lot of money trying to sell something nobody wants, is worse for them and eventually worse for us.
When closing is genuinely the better answer
The honest signals
- The business is essentially you. No transferable customer relationships, no systems another person could run, no assets of consequence. There may be nothing here that anyone would buy, however profitable it has been for you.
- The asset value is higher than the earnings value. If the business is worth more in pieces than as a going concern, that is a real finding rather than an arithmetic curiosity.
- The sector is in structural decline rather than having a difficult year. Buyers price the direction of travel, not the current number.
- You have already run a proper process and had no credible interest. Not one advisor and a listing. An actual process, properly marketed.
- Your health or your circumstances mean you cannot serve a handover period. Most buyers require six to twelve months, and an owner who cannot commit to that removes most of the buyer list.
- The profit depends on a licence, an accreditation or a personal relationship that cannot be transferred to anybody else.
The comparison between asset value and earnings value is the one that decides this, and the four methods guide explains how to run both. Valuation methods
First, which situation are you in
Everything on this page assumes you are solvent, meaning you can pay everybody what they are owed and still have something left. That distinction is not a technicality. It changes the process, your legal duties and your personal exposure completely.
If that is where you are, we have written a separate guide for it, without judgement. Restarting after insolvency
The sequence
- Choose the date and work backwards. Everything else is scheduled off this. Notice periods, contract end dates, lease break clauses and your final accounting period all have to fit around it, and several of them have lead times measured in months.
- Collect what you are owed, before you announce. Debtor collection becomes dramatically harder once customers know you are closing. Collect first and announce second, as far as your legal obligations allow. Take advice on where that line sits in your jurisdiction, because in some circumstances it moves.
- Tell your staff properly. There are statutory notice periods, and in most European countries there are collective consultation obligations above a threshold number of employees, with real penalties for getting them wrong. This is the step where do it yourself closures go wrong most expensively.
- Finish or exit your customer contracts. Fulfil what you can. For the rest, read the termination clauses before you speak to anybody, because an orderly exit negotiated early is far cheaper than a breach.
- Sell the assets. Give this time. The difference between a considered disposal and an auction under time pressure is the largest controllable number in the whole exercise.
- Settle suppliers, leases and finance. Leases are the item that surprises people. Dilapidations, the obligation to return premises to their original condition, can run to a substantial sum that appears nowhere in your accounts.
- Final accounts, tax clearance, formal dissolution. The company continues to exist, and to carry obligations, until it is formally struck off or liquidated. Budget for professional fees here. It is not the moment to economise.
What a closure actually pays
Owners consistently overestimate this, because they start from the balance sheet. The balance sheet records what things cost. A closure realises what things fetch, and those are very different numbers.
A small manufacturer with book net assets of €850,000 closing over six months.
A solvent wind down, illustrative| Plant and equipment, book value €340,000 | €95,000 | Used specialist equipment sells for a fraction of its written down value. This is the single largest surprise in almost every closure. |
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| Stock, book value €180,000 | €54,000 | Finished goods do better than raw materials. Work in progress usually realises close to nothing. |
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| Debtors, ledger €520,000 | €470,000 | Collection rates fall once closure is known. This assumes you collected first. |
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| Cash at bank | €60,000 | |
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| Trade creditors settled | -€250,000 | |
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| Redundancy and notice | -€180,000 | Statutory entitlements plus contractual notice. Long serving staff are expensive to release, and rightly so. |
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| Lease exit and dilapidations | -€85,000 | |
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| Professional fees | -€35,000 | |
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| What the owner receives | €129,000 | |
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The balance sheet said €850,000 of net assets. The owner received €129,000. Nothing went wrong in this example. This is what an orderly, competently run, solvent closure looks like, and knowing the shape of it in advance is the point of showing it.
Two conclusions follow. The first is that if there is any credible buyer, almost any sale is likely to beat this, which is why finding out is worth the effort before you commit. The second is that if there genuinely is no buyer, €129,000 and a clean finish in six months is a considerably better outcome than two more years of declining trade followed by the same closure with less in the bank.
Four things to do before you commit
In this order
- Find out what it would sell for. The most common reason owners close a sellable business is that they never established that it was sellable.
- Get a realistic figure for your assets. Ask a broker or an auctioneer in your sector what your equipment actually fetches. Not an insurance valuation and not the number in your accounts.
- Speak to one buyer type you have already dismissed. A competitor, your largest customer, or your own management. Owners rule out the obvious buyer surprisingly often, usually for reasons that are about pride rather than about price.
- Take tax advice before you start. The order in which you dispose of assets and extract the proceeds can change what you keep, and once the sequence has begun it is difficult to unwind.
The part nobody prepares you for
The practical work here is manageable. The difficult part is telling people, and owners are consistently unprepared for how it feels to tell staff who have been with them for twenty years.
Two things help. Tell people in person and early enough that they have time to act, rather than at the legally required minimum. And be specific about dates and money, because uncertainty is harder to carry than bad news is.
Your reputation after this is determined almost entirely by how you handle these conversations and whether everybody was paid. In a small sector, that reputation is an asset you keep, and it matters if you ever start something else.
Find out which decision you are actually making
The question underneath this page is whether anyone would buy it. Most owners considering closure never establish the answer.
The valuation is free and takes about ten minutes. If nobody would want what is here, you can close with confidence rather than doubt. If somebody would, you will have found out while the door is still open.
Step one of three: see your number, free, with no account and no name.
See what it's worth