When an owner decides to sell a business there are a number of steps they need to take to ensure the sale is successful. We take you through a quick breakdown of the process involved from preparation through to finalising the sale and hand-over.
Want to sell a business? Here is a quick breakdown of the process to sell a business.
1. Get Ready to Sell a Business
So you have made your decision but don’t know where to start? The key is in the preparation. It would be ideal if your company is always sales-ready, but preparation for the sale itself requires quite a few details to be in order, the right business broker can assist you with this process from start to finish.
“You definitely need to have an exit strategy in place, especially if you have a partnership. Most of my businesses have been partnerships and while none of them has ended horribly, it’s definitely better if you know how it is going to work if say one person wants to get out, and even better if you’ve got an idea of what point you want to get out.” Justin Bunt – MMJ Real Estate
Before consulting a broker or accountant, there are certain things you can do and should have ready to go, such as;
- Organise your documents – see a sellers checklist
- Systems your business – It’s important to have detailed systems to ensure a smooth handover when you sell a business. Checklists, training manuals, video tutorials, and the creation of a flowchart are some of the common options.
- Get an Appraisal – What will you sell a business for? As an owner it is a common mistake to overestimate the worth of your company, to understand the value and get the most out of your sale, find a business broker that has experience in your industry and qualifications to conduct a valuation.
- Assess your Tax Obligations – Consider your Capital Gains Tax, GST payments, Concessions, Tax Input Credits. Visit the ATO website for full details. These can heavily impact how you decide to sell a business, especially if it is a company.
- Establish your team – Who is going to help ensure everything goes smoothly when you sell a business? Make sure you have a solid team of knowledgeable professionals a solicitor or conveyancer for your legal advice and services. Bsale has a useful guide on How to Choose the Right Business Broker.
- Decide When to sell a business – There are a variety of reasons why an owner may decide to sell their company; however, determining the perfect moment may be difficult, and often a personal decision rather than a professional one. Perhaps the seller is relocating, retiring, or has simply had enough. The most common error that owners make is failing to assess when the optimal moment to sell so their company will attain its maximum price.
- Prepare Legal Documents – you will need NDA, HOA and Contract of Sale
- Prepare Memorandum – This one of the most crucial documents used when communicating with potential purchasers after they have signed an NDA. Your broker will assist in determining what facts are included in the memorandum and what would be better covered during the Due Diligence process.
2. Find Those Potential Buyers
Now that you have all your ducks in a row, The next step in the process to sell a business is advertising and marketing your business for sale! Whether you decide to sell a business privately or engage with a broker, there are a variety of marketing channels you can choose.
Choose the Best Marketing Channels
Marketing channels can include the open marketplace to sell a business, such as a website like Bsale.com.au, contacting buyer databases, approaching competitors or perhaps directly approaching your clients, staff or suppliers.
Create an Effective Advertisement
An effective ad can make all the difference to the number and quality of the enquiries you receive when you sell a business. Your images, your message and your call to action are some of the key things you should consider when creating your ad. Your pictures and your message are the key to packaging and presenting your company, they will help with exposure and click through rates and tell potential buyers the important information they need to know. Your call to action is how you can ensure you make the process as easy as possible for a potential buyer, don’t just rely on a “press the contact” button.
Filter Buyer Enquiries
Unfortunately, the business sales marketplace has a lot of ‘tyre kickers and brokers spend a lot of time filtering out these people from potential buyers that are legitimately looking for information. A good tip when you sell a business is to develop a list of questions you can ask a potential buyer about their experience and finances. You can also have a phone conversation with them or invite them to come and view the shop or location, it will show whether they will commit and are genuinely interested.
3. Finalise and Sell a Business
Now that you have a genuinely interested buyer, the next step is to negotiate and finalise the sale itself. It’s important to have good negotiation skills and be firm on what price you are willing to accept when you sell a business, it is an asset after all.
A core component of a business brokers role is the negotiation process as shared by Zoran Sarabacca from Xcllusive Business Sales where brokers’ focus is now more on the deal rather than trying to find the buyer thanks to technology and sites like Bsale.com.au “Once you find the buyer, negotiating this deal and facilitating the sale, getting the deal across the line and overcoming issues as they arise through due diligence and negotiation, it’s a very personal part so I really think the business brokers job shifted because of technology. A little bit more deal-making by the virtue of finding a buyer being a reduced focus.” Zoran Sarabacca – Xcllusive Business Sales
Once the buyer is ready to proceed a deposit will be made and due diligence can commence so you can sell a business. This is the part of the sale in which the buyer assesses the company to ensure their expectations are met. It is always advised that a professional is consulted during due diligence such as a broker, consultant, accountant or lawyer.
Once the HOA has been finalised by both buyer and seller, the Contract of Sale is written, signed and exchanged so that the sale can be officially performed. Settlement date is set where both parties are obligated to provide, depending on how the sale is structured, which will be detailed in the Contract of Sale.
Now that the settlement date has arrived, it is officially time to exit your company and hand over the metaphorical (or perhaps physical) keys to the new owner. The sale is complete, you have successfully been able to sell a business! It can be a bittersweet moment for the owner and while the sale is over, there are a few things to consider such as your Capital Gains Tax obligations and what your options are in terms of re-investing your money.
Bsale has a comprehensive guide to selling a business that goes into much more detail on the above-mentioned points if you would like to learn more.
This article was written by Caitlin Mary via Bsale