Will financial uncertainty impact your business sale?

As we enter a new tax year, financial uncertainty is a hot topic of discussion between our business brokers and their clients. The question we’re being asked most is ‘What impact will the UK National Living Wage and Employer’s National Insurance increases have on the sale value of my business?’.  

The uncertainty created by economic and political factors is a genuine and valid concern for owners selling their business. External influences can affect market conditions and reduce buyer confidence. Look at what’s happened to share prices in the aftermath of the Trump Tariff announcement. The global markets are reeling. The result of uncertainty in financial markets is a more cautious and demanding buyer.

In this blog we share the steps to take to plan for the impact of financial change and uncertainty on your business sale, how to calculate the potential impact and present this information to maintain buyer confidence.    

Preparing your business for huge financial change

Every business experiences expected and unexpected challenges in its lifetime. Losing your biggest customer or a major new competitor in the market would be unexpected. The planned increase in National Living Wage or tax is not. The latter is a significant change for businesses which employ staff. However, you can forecast and plan for some financial changes to prevent them devaluing your business.

Of course, external factors can influence business value positively and negatively. Valuations are made at a specific point in time. No business valuation is set in stone and most are open to negotiation. So while we are focusing on the consequences of rising costs in this post, financial uncertainty can have positive impacts too.

A business broker will do their utmost to foresee challenges and guide you to prepare for the sale process, but not every challenge can be anticipated. Staying on top of your numbers and keeping your financial forecasts up to date will help you to navigate change. Thorough, accurate and detailed forecasting is essential.

For a current market business valuation, contact your local business broker.

Are your financial forecasts fit for purpose?

Since the changes were announced in November 2024, we’ve been advising vendors to recalculate their financial forecasts based on the new National Living Wage and Employer’s National Insurance rates effective from April 2025.

Buyers are asking for an outline of how a business will cover these rising costs. Will you pass the increase on to customers, plan to curb recruitment, make redundancies, or can you cover it from profits?

Why financial projections are important in business sales

Accurate and detailed financial forecasting is crucial when selling a business as a buyer wants to know the business they are investing in is on a sound footing – now and in the future. Building an honest picture of where your business will stand financially at the end of this year, next year, and beyond builds buyer confidence. It shows you are on top of your numbers and have considered different external scenarios and their possible impacts.

Buyers will analyse your forecasting to understand the risks the business will face and for future growth, business planning, budgeting and recruitment. They need those figures to make a considered valuation, and if they decide it’s a good investment decision, anticipate any tough choices that lie ahead.

Presenting the possible impact of financial challenges

Vendors should consider these four themes when preparing and presenting financial forecasts to prospective buyers.

1. Historical data: Historical business accounts give a buyer insight into how your business has weathered the storm of unexpected financial challenge in the past. If your balance sheet demonstrates that the business has emerged unscathed from previous uncertainty, this puts it in a strong position to manage future risks.
   
2. Cash flow forecast: A buyer will scrutinise your cash flow forecast to understand expected future revenue and costs, so it’s essential to keep this up to date. If you haven’t already re-forecasted expenditure on salaries and taxation for 2025-26, you should do this now. Sometimes it’s wise to prepare best- and worst-case scenario cash flow forecasts to be honest and transparent about income and expenses. 
   
3. Impact on pricing: Fluctuating market conditions will affect your supply chain and the end price you charge to customers. Calculating the impact of costs on the price of your products and services is critical to strategic planning and forecasting future profits. You must explain your costs clearly and accurately. Projected costs will have a direct impact on business value.
   
4. Know your sector: The automotive sector, steel, chemical and pharmaceutical industries all expect to be hit hard by new US trade tariffs. While the tariffs could not be foreseen, staying up to date with changes in your sector can inform your business planning now and under future ownership. For example, if your business is dependent on exporting you would forecast various scenarios for foreign exchange rates and calculate their potential impacts on trade.

How to limit the impact of financial uncertainty on business value

The way you present your business for sale is important. Every business vendor must make sure their financial forecasts are fit for purpose. You cannot prepare the forecasts prior to listing your business on the market and then forget about them. As economic conditions change, you should be reviewing and refreshing your financial forecasts to show potential buyers exactly how you stack up against the competition. It’s part of risk management and protecting your business during the sales process. In fact, the future of your business, and your own future plans, depend on it.

Contact your local business broker

If financial forecasting and modelling is not your strong suit, your local Business Partnership broker can advise on the kind of financial documentation a buyer will expect to see. Find your local expert here. We help our clients handle every aspect of their sale or purchase, from valuation and finding your ideal buyer to supporting the sales process through to completion.