Selling a business

Deciding if selling is the right option for you, preparing for sale, setting the right price and making the sale are all steps in selling your business.

Selling a business will require planning to make sure you receive the best possible price.

Determining whether selling is the right option

Before deciding to sell check whether you:

• really want to sell or if you just need a break from your business
• have considered options such as bringing in outside management
• have the support of family and friends
• have considered if the market conditions are right for selling
• will make enough money from the sale to support yourself until a new income source is secured
• will be restricted from trading in a similar business once you have sold
• fully understand the implications of selling, by consulting your financial adviser, accountant or lawyer.

Preparing your business for sale

Ideally, you will begin preparing for sale well before you put your business on the market.

This could include:

• Making sure you document processes and policies, making it easier for the new buyer to operate the business.
• Ensuring employees have documented job descriptions.
• Obtaining written agreements from suppliers and review contracts to make sure they don’t expire during the sale.
• Selling obsolete or slow moving stock.
• Reviewing plant and equipment and selling anything not required.
• Making sure premises are well presented.
• Reviewing your lease agreement to ensure it doesn’t expire during the sale and includes provision to transfer the lease to a new owner.
• Collecting outstanding debts and paying your creditors.
• Obtaining audited financial statements for at least the previous three financial years.
• Reducing employee leave liabilities by encouraging them to take leave, if possible.

Potential buyers will want to undertake their own due diligence into your business.

However, it is a good idea to prepare a buyer’s information pack outlining key information about the business and what is included in the sale.

As a general guide the pack should include:

• confidentiality agreement
• description of your business
• customer or client profile
• industry information including how your business performs against industry benchmarks
• detailed list of business assets and their value – these may include documented procedures and systems, plant and equipment, stock, intellectual property, client list, lease information, employees’ skills and qualifications, key business relationships and contracts.
• testimonials from suppliers and customers
• audited financial statements for at least the previous three financial years
• offer and acceptance form
• contract of sale.

Setting the right sale price

Determining the value of your business can be very difficult. You may want to obtain advice from your financial adviser, accountant or a registered business broker with experience in selling similar businesses.