Selling a business can be a complicated and emotional process. Selling a business can take months or even years, and you want to ensure that the process goes as smoothly as possible. It’s essential to start planning as soon as you decide to sell to allow yourself time to get your affairs in order and get the best possible price for your business. Here are 11 steps to help you plan and execute a smooth sale.
Understand Your Motivations
Before you put your business on the market, take some time to think about why you’re selling. Prospective buyers will ask you this question, so you need to be prepared to answer it. Understanding why you are selling your business before starting the selling process will help you communicate your reasons to potential buyers.
Some common reasons for selling a business include retirement, burnout, health issues, or wanting to move on to something new. If you are selling because your business is in financial trouble, potential buyers may be reluctant to purchase a business that is not doing well, and you only receive low offers. In this case, other options may be available, such as restructuring or refinancing, which may help you avoid selling your business altogether. If you’re considering selling because your business is in trouble, it’s best to speak with a professional before making any decisions.
You also need to decide whether you are looking for a quick sale or are willing to hold out for the right offer? A clear understanding of your motivations will help you set realistic sales expectations.
Determine the Right Time to Sell
One of the things you need to think about is when is the right time to sell your business? This is an important question to consider because the timing of your sale can significantly impact the price you get for your business.
The timing of your sale will also depend on your circumstances. If you’re selling because you’re retiring, you may have a timeline in mind for when you want to retire. On the other hand, if you’re selling because you’re burned out or ready for a new challenge, you may be less concerned about timing and more focused on finding the right buyer.
Another important factor to consider when deciding whether or not to sell is the current market conditions. If you’re selling in a buyer’s market, you may have to accept a lower price for your business than you would in a seller’s market.
Decide What You Want to Sell
Before starting the process, you must be clear about what you are selling; this will help you determine the value of your business and market it to the right buyers. Some businesses are sold as a going concern, meaning that the buyer is purchasing the business as a whole and will continue to operate similarly. This is often the case for businesses with a strong brand or reputation. Other companies are sold as an asset sale, which means that the buyer only buys certain assets of the business, such as the equipment or the premises.
Some options to consider include selling:
- The entire business
- Specific assets of the business
- A portion of the business
- The intellectual property of the business
- Property or real estate associated with the business
Get Your Books in Order
Get your books in order and ensure that all of your ducks are in a row before you start marketing your business to potential buyers. Getting everything in order ahead of time will make the process much easier and show your potential buyers that you are professional and that your business is well-run. You will need to provide potential buyers with financial statements and other documentation proving your business’s profitability and show you are meeting all your financial obligations and have a healthy cash flow. Getting top dollar for your business will be difficult if you don’t have your books in order.
Get a Professional Valuation
Determining the value of your business is a vital step in selling your business. This can be difficult, as many factors need to be considered, such as the current market conditions, the future potential of the business, and your unique circumstances. Different valuation methods, such as the market, income, and cost approaches, can be applied. A professional such as a business appraiser or broker can help determine your business’s value and add credibility to the asking price, making it more likely to attract buyers. Pricing your business too low could leave money on the table while pricing it too high could scare away potential buyers. So, it’s essential to find the right balance.
Consider Using a Broker
If you’re unsure how to sell your business, you may want to consider using a broker. Brokers are experienced in selling businesses, have specialist industry knowledge, can find potential buyers and negotiate the sale of your business so you get the best possible price. Do your homework and choose a reputable broker with experience selling businesses like yours. An experienced broker will take the time to understand your business and provide expert advice on preparing your business for sale and marketing it to potential buyers.
Get Your Accountant Involved
Your accountant can be a valuable resource when selling your business. They can help you understand the tax implications of selling your business and ensure that your financial documentation is in order. Communicate with your accountant early on in the process so they can help you with the financial aspects of selling your business. This will make the process of selling your business much smoother.
Marketing Your Business
Once you’ve decided to sell your business and determine its market value, it’s time to start marketing it for sale. This can be done through many different channels, such as:
- Online business-for-sale websites
- Your network of contacts
- Business brokers
- Online advertising
- Print advertising
- Customers or suppliers
- Direct mail campaigns
- Listings in business broker databases
- Advertising in trade publications
- Word of mouth
Each of these channels has its pros and cons, so choosing the one that’s right for you and your business is important. Depending on your business, you may want to be discreet about selling your business and not publically advertise it. This will impact how you market your business—for example, using a business-for-sale website that allows you to list your business confidentially. This can be a great way to sell your business without tipping off your competition and alerting customers or employees that you may be leaving. On the other hand, you may want to publically advertise to get as many people as possible interested in your business. It all depends on your industry, type of business and circumstances.
Negotiate the Sale
Negotiating the sale of your business can be complex, as you must balance your interests with the buyers. If you have engaged a broker, they will be able to help you with the negotiation process. There are numerous aspects that you will need to negotiate with a potential buyer, such as:
- The sale price
- The payment terms
- The length of the contract
- What is included in the sale
- Any conditions of the sale
- The handover period
- Non-compete clauses
Finalise Your Tax and Legal Obligations
Once you’ve reached an agreement with the buyer, you will need to finalise any tax and legal obligations. Engage with your accountant to ensure that you meet any tax obligations and seek legal advice to ensure that the contract is binding and meets your requirements.
Complete the Sale and Hand Over Your Business
Your negotiated deal will need to be documented in a legally binding contract. This contract will set out the terms of the sale, including the purchase price, payment terms, inclusions and exclusions, conditions, warranties and the length of the contract. Once the contract has been signed and the settlement period has passed, the buyer will pay you the purchase price per the agreed terms and take over the business or assets.
As part of the sale process, you may need to:
- Transfer any leases or contracts that the new owner is assuming
- Cancel or transfer any licences or permits to the new owner
- Finalise and pay any outstanding tax obligations.
- Notify your employees of the sale and take the time to say goodbye to your employees and thank them for their service.
- Cancel your ABN, which will cancel your GST and other tax registration
- Notify ASIC
- Cancel or transfer insurances or memberships
- Notify utilities and other service providers of the change in ownership
- Notify the bank and other financial institutions of the change in ownership
- Cancel or transfer the business name to the new owner
- Handover any keys, security codes or other physical items to the new owner
- Ensure that all employees have been paid their final wages and any unused annual leave entitlements
- Provide the new owner with access to any online accounts, such as social media or website hosting
- Provide any information the new owner needs about your suppliers, customers or other business contacts.
- Ensure that all your records are up to date and complete
- Provide training to the new owner
- You may also want to consider writing a letter to your customers, suppliers and other business contacts to let them know about the change in ownership.
- Update your Will to reflect the sale of your business.
Once the sale is complete and you’ve handed over the business, it’s time to move on to the next chapter in your life. Congratulations on successfully selling your business!