How To Sell Your Business - Checklist

Get Clear with Your Objectives – For yourself As an Owner and For Your Business.

Whether you’re a sole director, a family business, or have unrelated partners – it is important to be clear about each shareholder’s / owners’ objectives, including financial outcomes, intentions to stay in the business or leave the business. Possibly some of the owners may have preferred exit timings, or desires for the future of the business. No matter whether you are a small, media or large business, it is important that all owner’s/shareholders of the business have their entitled say.

Research other businesses for sale like Yours

You may think your business is unique but often it is not. There is no doubt that businesses like yours, whether it’s the industry type, the size of your business, the location of your business etc. No doubt there is already another similar business to yours currently for sale. Do your research and look at some of the main sites that businesses for sale list on. Sites like www.seekbusiness.com.au or www.Businessforsale.com.au or www.CommercialRealEstate.com.au – These are just some of the sites we include in our Advertising Packages: sell your business online

Prepare Your business For Sale – Start Within

To maximise further value of your Business prior to sale does not mean investing in the latest systems or equipment. In fact, quite the opposite, as it is better not to purchase major capital items when you are thinking of selling. It is more important to ensure that all your current systems and procedures are in place to demonstrate how smooth running everything is with the business. This could be as simple as stock ordering, or front and back of house procedures with a restaurant. It could be a daily check list for deliveries, or how your business processes orders. It could be a list of your key customers, or suppliers. No matter the procedure, it is wise to have everything documented. This gives confidence to a buyer, knowing that when they take over, everything they need to know is right there.

‘Business As Usual’ During the Sale Process

There are many costs associated with a property: original price + stamp duty you paid + any renovation costs + any recent repairs + your advertising costs + any legal work. Once calculated, you will have a better idea of the minimum you will accept.

Talk To Your Accountant about Your Business Sale

Your accountants can help you anticipate for any tax liabilities of a sale. i.e. capital gains tax may or may not apply. GST components may or may not apply. At this point in time, it is not about how much you will actually get for your business but give an example of an approximate amount to your accountant and they will then be able to tell you what other liabilities there would be once sold. They can also start to prepare a clean or ‘normalised’ set of historical financial data. We all know when running a business there are some costs associated that are not the normal running of business expenses, so these are what they call add backs. Your accountant can advise you.

If you don’t have an accountant there is a wealth of information on the Australian Tax Office website: https://www.ato.gov.au/business/changing,-selling-or-closing-your-business/in-detail/things-to-consider/

Tell or Not to Tell Your Staff About the Sale of Your Business

When selling a business, telling, or not telling your staff is an individual choice. It is more common for owners of a business not to tell their staff, otherwise some staff may leave which may be detrimental to the ongoing business. Equally important, if your staff know, then you risk them telling some of your customers. Selling your business and dealing with prospective buyers can all be done privately, outside of hours if necessary and certainly a lot of communication via your private email address. If you are truly prepared and have all your documentation necessary, then it’s easy and reasonably non time consuming to deal with prospective buyers. If the buyer wishes to visit your business during business hours, they can do so without revealing their purpose. Besides, by now a prospective buyer would have signed a Non-Disclosure Agreement (NDA).

Clean Up

If your business has a premises, then tidying up and ‘de-cluttering’ should start as early as possible. Many business owners who have had their business for years have a tenancy to hoard things. Now is the time to throw out or sell off those items that are not needed for your business. This includes old equipment, old telephones, faxes, computers etc. It also means software/old documents that have not been used for years. Cleaning up is something that should be done yearly as far as ‘Best Practice’ is concerned, so hopefully this job is not a major one.

Take Photos

The quality of your photos is important. Yes, it’s just a business but it will still be ‘on display’ – on the internet. Remember there are thousands of potential searchers for businesses and yours is not the only one they may be looking at. Your whole advertisement should be presented well including photos. Even a mobile phone can take good shots, but hiring a professional will always improve your chances and the cost is minimal in the scale of things. If you do decide to take your own photos, always take ‘landscape’ (horizontal) shots. Click here to read more about ideal photo sizes by Realstate.com.au : https://help.realestate.com.au/hc/en-us/articles/115002640946-Image-size-for-realestate-com-au-listings#ratio-pixels-0-1

A Contract of Sale

A contract of sale is normally prepared by a solicitor. The solicitor needs to be in the same state as your business, as laws differ state to state. Most businesses already have a solicitor, if not, it is often best to use a local solicitor. A Contract of Sale will have the Vendors Name, The business Name, the Buyers name and address, A list of shareholders or owners of the business, The agree Purchase Price, Deposit Details, A purchase price apportionment (assets, Goodwill etc), any restraints (i.e. owner can’t operate another similar business xx kilometres from this business, or after xx years etc.

Any conditions from the buyer (i.e. subject to), A list of Employers who must be offered employment by the Purchase, Details of the premises, the lease, any motor vehicles/details, equipment that is hired/details, Intellectual Property Rights, Excluded assets, and any applicable clauses. It is a detailed document best prepared by legal firms.

Disclosure Statement

This statement is required for the sale of a small business at a price up to $450,000. It is usually completed by the seller and/or their accountant and sometimes by the solicitor. This is a standard form prescribed under the Estate Agents (General, Accounts and Audit) Regulations 2018. It is also known as a Section 52.

The statement provides a due diligence guide for a buyer. It sets out financial performance of the business (usually the last two years). The statement should also provide the financial performance for the current financial year up to the most recent quarter. If the statement is not provided to the purchaser, the contract can be voided.

Due-Diligence

The true definition of due diligence is: a comprehensive appraisal of a business undertaken by a prospective buyer, especially to establish its assets and liabilities and evaluate its commercial potential. It is in the interest of YOU the seller to have everything together in one document which should include everything the buyer needs to do their due diligence. This is known as either a Business Prospectus or an Information Memorandum

Some of the Advertising Packages with No Agent Business include the full preparation of an Information Memorandum. This document will save you time and money, along with giving full confidence to your prospective buyers. It is highly recommended especially for businesses selling for more than $200,000.

Settlement

Settlement is handled by the solicitor who prepared your contract of sale. It is the Australian Law than any deposit or funds for the purchase of a business must go into a Trust Account. This legal system we have is to protect both buyers and sellers. The solicitor will handle the whole transaction and deal with your buyer.

Take Photos

The quality of your photos is important. Yes, it’s just a business but it will still be ‘on display’ – on the internet. Remember there are thousands of potential searchers for businesses and yours is not the only one they may be looking at. Your whole advertisement should be presented well including photos. Even a mobile phone can take good shots, but hiring a professional will always improve your chances and the cost is minimal in the scale of things. If you do decide to take your own photos, always take ‘landscape’ (horizontal) shots.

Create a Story

Preparing a good description for the sale of your business is equally important. A good business description gives enough detail for potential buyers to want to know more and entice them to contact you. It should include, the history of the business, how many years established, the benefits of it, staffing, trading hours and other basic information. If your business is in a great location perhaps for tourists etc or for living, then talk about the location as well. Remember your buyer can come from anywhere (nationally or internationally). Some of the packages with No Agent Business, include the professional copy/description.

Where To Advertise

It makes sense to advertise where buyers look. Yes, there are free sites to list a business for sale but it is not likely you will get quality buyer enquiries, sometimes known as tyre kickers! Don’t lose faith in what you are selling. You’ve probably ran the business for years and may not understand the true worth of it. Get A Business Valuation – Click Here:

Remember for a buyer, to buy an existing business already in place with existing customers or patronage, is far better than a person starting up a new business. When advertising your business for sale, it is important to include as many good sites as you can. The more people that see it, the more likely your enquiries. Our No Agent Business packages cover some of the largest sites in Australia and Internationally. See packages here: Selling a business

Social Media Marketing

This is worth every cent! Not only can a strong, strategic, social media campaign target the right buyers, it can target buyers from certain locations too. Having your business for sale on good worthy sites is great but to have a social media campaign as well, is better. Social media platforms such as facebook, linked in, Instagram etc have a great deal of following and subscribers. Pretty much 90% of the country subscribe. So, with clever targeting of the right demographics, you have put your business sale right in front of them! It’s amazing. No Agent Business have an expert team who create the right campaign to attract the right buyers which is included in some of the packages.

Signs

It is unusual for just a business for sale to have signage outside of your premises. However, there are some businesses that like to have one, especially those in high tourist locations. A sign can display ‘what is for sale’, so if it just the business it will need to explain that. Other details on the sign might include: Established For xx Years, Secure Lease In Place, Well Known Business etc. If you own the commercial property as well as the business, then the sign should be clear with this giving details of the actual property as well. Usually land size, building size are included on the sign. Some of the No Agent Business Packages include small or large For Sale or Photoboards.

Effective Listing Tips

Click here to view more Listing & Marketing Tips

Also note that many of our Advertising Packages include the professional write up about your business.

How Will You Price Your Business For Sale

There are several ways and methods when advertising your business for sale:

1. WIWO – (Walk in Walk Out) – This is more common in service-type businesses that usually hold little stock, such as a café or a hairdresser or a manufacturing business or a mechanic. Once a price is agreed upon, contracts are signed, the keys change hands, and the new owner takes control – therefore a walk in walk out situation. One of the major drawbacks of WIWO for a seller is when the valuation isn’t accurate as you could be under selling. Drawbacks for a buyer could be If the business is holding large amounts of stock that is difficult to sell (old stock). Or the machinery is on its last days and in need of repairs. Nevertheless, it is a relatively common way of selling a small business.
2. Fixed price plus SAV (Stock at Valuation) This is more common for those businesses that do hold a great deal of stock because on any given day the price of what stock you have one day could be significantly different the next day. A draw back for the vendor is you need to really know your stock you have at hand. Usually, these days most businesses have software/barcoding/lists of stock etc at hand. So, if this is the case, selling your business with a price + SAV would be the best.
3. Price By Negotiation This is exactly what it means. You as the vendor are demonstrating that you are willing to negotiate even without a sale price nominated. Remember, when advertising your business for sale, the objective is to get enquiries, then you can work with them. When you have serious buyers, they understand this, so it’s a case of negotiating and reaching a mutual agreement on the worth. But it is still important that you have a clear price in your own mind as a vendor.

Display or Not Display a Price?

It is your option to display or not display a price. There are advantages and disadvantages. Choosing not to display a price could be frustrating for buyers looking to buy a business, as they have no idea at all as to the sale price you want. If your business is not a popular business type, then it is often best not to display a price, as the emphasis is on the industry you are in and not just your business. If your business is a more popular type, i.e. a café, a restaurant, a hairdresser or even an on-line business, then it may be best to display a price or a price range. This is all optional and can be discussed with one of our consultants.
Further Tips can be seen here in getting the Right Price: https://www.noagentbusiness.com.au/business-commercial-guides/how-to-sell-your-business/setting-your-price/

If you are still unsure of the value of your business, then click here and fill in a few details and one of our consultants to help: https://www.noagentbusiness.com.au/get-a-business-valuation/

Stay Open-minded and Flexible with Negotiations

Some business sales can be seen as complex but when it comes down to it, its just like selling anything else. As a vendor you of course want the best price you can get and as a purchaser you want to get the best deal you can, so somewhere in the middle is always a good place to start. If you are fortunate to have more than one buyer looking at the same time, then you are in a much better negotiating position.

Negotiations always involve some amount of give & take on both sides. For you the vendor, it is helpful to stay focused on what you know you want. Perhaps give the buyer more options if they are offering a lower price. For example, some of the equipment items could be excluded, like a vehicle because you know you can sell this separately and get a good price. Perhaps it could be a staged purchase price meaning: Half the purchase price and the other half 3 months after they have taken over (however with this, you need to have a very tight contract of sale with security behind it. Your solicitor could advise you on this.

By staying open minded when negotiating, this will no doubt improve your chances of finding common ground with the buyer – a mix of pricing, terms and structure that you can both agree on – while getting you the overall result you want.

Help Your Prospective Buyer(s) Lessen Risk

One of the biggest influences on buyers as regards to the pricing & terms they offer is their perception of risk in relation to the acquisition. As the vendor there are various ways to help reduce perceived risk and improve your outcome. The most critical of these is making sure you provide full disclosure to the qualified party(s) about your Business’s history and performance. Hiding or glossing over negative items rarely work and invariably may destroy trust when things are later uncovered in due diligence. There is no ‘perfect business’ – every business has its ups and downs, every business is not 100% ship-shape. By being more open and ‘real’ about your business will go a long way when communicating with a potential buyer.

This increased flexibility during negotiations will improve your chances of finding common ground with the buyer – a mix of pricing, terms and structure that you can both agree on – while getting you the overall result you want.

Further Tips on Negotiations can be found here:
https://www.noagentbusiness.com.au/business-commercial-guides/how-to-sell-your-business/negotiating-your-sale/

Offers

Remember the first offer you have may not be the best one. Often small business owners jump to accepting a lesser price but holding out could mean a better sale price. Again, open & honest communication is always better. If you receive an offer that you’re not quite happy with, you can express this to the buyer. If a potential buyers offer is way below what you want, then you can thank them for their offer and say you don’t accept and invite them to put a better offer forward. If however their offer is close to your asking price, then you need to weigh up what is best. i.e. you have a genuine buyer now and if you don’t accept it may take longer to find another buyer.

Your obligations after a sale:

1. GST
   If you are selling your business as a ‘going concern’, then no goods and services tax (GST) would normally apply. As a seller you may be able to claim input tax credits for GST you have already paid on expenses relating to the sale. It is important that you check with your accountant as to your obligations if any for GST.
2. Capital Gains Tax
   The sale of your business may be susceptible for Capital gains tax (CGT) which arises when you sell or dispose of assets you acquired on or after 19 September 1985 (post-CGT assets), minus any capital losses. It must be noted that the sale of a business, is actually the signed date of the contract and not the settlement date. So, keep this in mind when selling.
3. Small business concessions
   There are various CGT concessions available to small business owners. Correctly applying these concessions may reduce your CGT liability when selling a business.
   • 15-year exemption – that may exempt a capital gain from a business asset you have owned for at least 15 years
   • 50% active asset reduction – that allows you to reduce the capital gain arising from the sale of a business asset
   • retirement exemption – that allows you to receive relief from CGT if you sell assets called active assets used in your business – the exemption does not apply to gains made from passive (investment) assets
   • rollover – that allows you to defer a capital gain from the disposal of a business asset for two years (you can defer the capital gain for longer than two years if you acquire a replacement asset or make a capital improvement to an existing asset).

The above information is available on the ATO website: https://www.ato.gov.au/business/changing,-selling-or-closing-your-business/in-detail/things-to-consider/