Walking away from a business as the owner isn’t as simple as handing in your resignation letter. If you’ve already started looking into the process, you may have discovered that selling a business can be incredibly complex. However, if it is your first rodeo, remember that it isn’t ours. As Sydney business lawyers, we aim to make the process more palatable so you can walk away with the best outcome possible. But, before we can do so, we need to help you answer five crucial questions, including:
1. Why do you want to sell your business?
If you are selling because you are experiencing financial hardship, you might not have to throw in the towel. As business advisors and lawyers, we can help you explore other options to resolve this issue, and once the pressure is off, we can determine if selling is still the right move for you and your business.
On the flip side, if you’re turning over a dazzling profit but wish to say farewell, find a way to articulate the motivating factor behind your change of heart. This is because it will be the first thing a potential buyer will want to hear about. From retirement to partnership disputes, there’s a whole host of explanations, and a prospective buyer will be curious if it could alter their decision. So get clear on your why before you start shouting ‘business for sale’ from the rooftops.
Once we’ve ironed that out, it’s not quite time to publicise it yet. Instead, we will get started on the meaty task of doing our due diligence.
2. Is your business in a position to be sold?
Before your business goes up for sale, it needs to be fit for sale.
As soon as potential buyers come knocking, they’ll put your business under the microscope, investigating every aspect via the requested due diligence documents. So, to reduce a sudden onslaught of paperwork, it’s time to get your files and facts in order. Ensure all your business documents and data are up to date and ready to be laid on the table, including your business’:
- financial information;
- employment terms and conditions;
- intellectual property; and more.
Tie this all up with a bow, and then it will be time to move on to the evaluation stage.
3. What is a reasonable sale price for your business?
One of the most challenging parts of selling a business is landing on a price. Putting a digit on anything that falls outside a physical asset is hard. Intangible assets like intellectual property rights (such as trademarks), real property interests, supplier contracts and licences further complicate the matter. Adding to the challenging concoction is the fact that negotiations can easily and quickly fall through if you and the buyer can’t agree on the value of the business, so it’s essential to get this right.
Hope is not lost, though, as this is where an experienced third party can assess your business and assist you in determining an accurate price from an outsider’s perspective.
4. How do you find a buyer for your small business in Australia?
Once you’re armed with your due diligence documents and a price in mind, it’s time to find your buyer. You can go down the online or print routes like social media, online listing sites, or relevant publications. It is also worth reaching out to your network, including your business partners, clients, customers, suppliers, and competitors. If none of the above sit right with you, there’s also the option of a broker.
Once you find a buyer who is ready to talk about purchasing, let the negotiations begin. To avoid disappointment, it’s a good idea to first check if they have the necessary finances to purchase your business. A buyer invariably wants a lower price, so leave some wiggle room before you name your price. Once you’ve agreed on the amount, it’s time to get it signed on the dotted line, and there are a few of those.
5. How do you carry out the sale of your business?
If you haven’t already got a Business Sale Lawyer on board to help with your due diligence documentation, don’t delay any longer. You’ve put in the hard yards for your business, so we want to ensure that when you walk away, you are rewarded accordingly. Together we can draft and review contracts, negotiate the terms of the sale, exchange and finally settle.