Posted by Minna Boyle on 31 January 2019
Many of you might be in business to make it valuable, and one day sell it off.
After years of hard work, you can reach a point where you are ready to sell the business and move on.
It’s a big decision and it can be tough on a number of levels. Not least of which is the actual selling process!
That’s why we’ve made this simple checklist, to help guide you through how to sell your business in Australia.
1. To Sell Or Not To Sell?
Before you even get to the logistics of selling your business, ask yourself these questions: Do I want to sell the business? Is now the right time?
There could be various reasons for selling your business. For example, you might be interested in pursuing other ventures. Or you might be thinking that you’ll get the best value from your business if you sell now.
You may face circumstances out of your control and selling the business may seem like the only option, but sometimes it’s worth considering other alternatives.
For example, if you’re having trouble complying with the regulations, it may be worth speaking to a professional who could help. Or if you’re struggling with the workload, maybe you could look at taking on a new employee or reaching out to friends and family for support.
If you’re still sure that selling is the right decision, read on to find out more things to consider when selling a business.
2. Valuing The Business
It’s important to think carefully about the value of your business, so that you get the best deal from selling your business.
When valuing your business, the first step is to gather all your relevant business information. This means your financial assets, legal information, business procedures and plans, and staff, supplier and customer information.
Next you should consider how you want to value the business. There are several different ways to value a business, such as:
- Current market value in your industry
- Return on investment
- Business assets
- The cost of creating your business from scratch
- Future profit
This can be quite a complex process, so it’s often a good idea to speak to a professional valuer if you can afford to.
You can find some more helpful information about valuing your business here.
3. Finding A Buyer
There are several ways to advertise the sale of your business. You could:
- Use a business broker
- Advertise online
- Reach out to family, friends, employees and other in your network
- Advertise in trade publications
- Speak to contacts in your industry
You should consult professionals who can advise you on the laws in your state or territory, so that you know exactly what information you need to provide to your potential buyers.
4. Negotiating The Sale & Preparing the Contract
Once you’ve found a buyer, the next step is to negotiate the sale.
Again, having professionals around you can really help make this experience as easy as possible. Lawyers and accountants who regularly work on these deals can provide you with some insights into what is market standard for your transaction.
You’ll need to agree with the buyer on things like:
- What’s included in the sale
- The price
- The deposit
- The settlement period
- Handover training for the buyer (if needed)
- Arrangements for existing staff
- Warranties and indemnities
Typically, both parties will engage lawyers to write up a Business Sale Agreement to document the terms of the sale. This document is very important as it will determine your legal rights and obligations.
5. Employees, Tax & Other Legal Matters
Speaking of your legal rights and obligations, there are a few key things to consider.
- If you have employees, you and the buyer will need to decide whether the existing employees will stay on and work for the new business owner.
- Make sure you communicate what’s going to the employees! If they are transferring to the new business owner, legally they will be ending their employment with you. This means that you’ll have to give notice of ending employment, or provide payment in lieu of notice.
- You’ll need to provide all the necessary employee information to the new employer.
- There may also be some entitlements that the new employer has to recognise.
- There are tax implications for selling a business to be aware of.
- You should check if there are any special tax requirements in your state or territory, and make sure you meet all the lodgement, reporting and payment obligations you have to any government agencies.
- Think about whether Capital Gains Tax or Goods & Services Tax apply to the sale of your business assets, and whether any concessions are available.
- It’s a good idea to talk to your tax advisor about your options and creating an exit strategy or succession plan that minimises your risks.
- Depending on your industry and business type, there could be other things you need to take care of, such as insurance and regulatory compliance, so you should have a think about this too.
6. Signing the Contract
Once all the terms are agreed on, it’s time to sign the Business Sale Agreement. This is normally called ‘exchange’ or ‘signing’ and you might hear these terms used interchangeably.
If your transaction involves a deposit, usually the buyer will provide the deposit at this stage.
Now, just because you’ve signed the document, it doesn’t mean it’s all over.
There is one more step called ‘settlement’ or ‘completion’, which is when the business legally gets transferred over.
Depending on the transaction, the period of time in between exchange and settlement is when the parties get everything ready.
There are often conditions to the sale that need to be sorted out before the transfer can happen, such as organising finances or getting consent from the landlord to transfer the lease.
7. Transferring The Business (Settlement)
The final step: transferring your business to the new owner and receiving the purchase money!
Once you’ve made the sale, the final hurdle is making it real.
The kinds of things you, as the seller, will need to give over to the new owner are:
- Licences and permits
- Tax returns, activity statements and instalment notices
- Digital assets information
- Documents to transfer the registered business name
In exchange, the buyer will provide you with the agreed purchase money.
What to take away…
This selling your business checklist is designed to help give you some tips for selling your business.
It’s often a confusing process, but following these steps can help make it a bit clearer. It’s also a really good idea to speak to a lawyer who can help you put together the contract and advise you on your other legal obligations.
Feel free to get in touch with us if you need help with either buying or selling a business.
And just think – Once the business is sold, you can move on to your next adventure!