Selling a business can be an exhaustive and lengthy process, especially if you have never prepared your business for it or need to sell in a hurry. Whatever your reasons are, whether you are ready to retire or move on to new things, it is important to have a plan if you want the best price.
How do I sell a business?
Step 1: Determine why and what you are selling Are you selling all or part of the business? Will you be staying on to advise or will you quit the business entirely? Are you looking to set up a similar business that could become a competitor in the future?
Step 2: Get professionals on board You will need, at the very least, an accountant and a lawyer. Your accountant will help prepare your books for the buyer. They will assist you to meet your reporting obligations and wind up your involvement in the company when the new owner takes over. Meanwhile, a lawyer will help you draft and negotiate the contract from a legal perspective to protect your best interests.
Step 3: Prepare the business for sale · Get a thorough evaluation of how much your business is worth. This will involve cleaning your books, gathering financial evidence for potential buyers and dealing with debts and overdue payments. · Ensure all your business processes are transparent, smooth, scalable and replicable to entice more buyers. · Prepare a transition plan for your customers when the business changes hands. · Prepare your employees so that they can decide whether to stay or leave. · Talk to your manufacturers, suppliers, lenders and any party that you deal with to help them with the transition.
Step 4: Find potential buyers · Advertise your business online. · Use business brokers who can find potential buyers. · Use the word-of-mouth method. Approach competitors, suppliers or even clients who may be interested to take over.
Step 5: Negotiate the contract Once you've narrowed it down to one buyer, then it is time to negotiate the contract. Don't just look at the price. Consider the terms and conditions carefully, recognize what will get transferred and what won't, and make sure you are on the same page with the buyer's expectations.
Step 6: Transfer the business This is the phase with a lot of paperwork to transfer the ownership, assets, liabilities and networks. It is also the time to start executing your transition plan for your employees, customers, suppliers, contractors and other third parties.
Step 7: Deal with tax obligations While it is tempting use your proceeds, remember you need to deal with the capital gain tax in Australia. There may be other expenses such as GST, remaining leases, personal debts, etc.
What issues can arise when selling a business?
Make sure that the documentation transfers all the relevant assets and liabilities. The assets will include any property, equipment, fixtures, fittings and intellectual properties that the business owns. The liabilities will include debts to creditors and any existing contracts.
Be cautious when making statements about the business prior to the sale. If those statements are untrue, they may expose you to a lawsuit for misleading the buyer, deceptive conduct or misrepresentation.