Sell Your Business: Process

I. Planning and Preparation

Start planning early. Decide why you want to sell, check if your business is ready, organize your documents, and maybe improve operations.

• Reasons for Selling: Make sure you really want to sell and have thought about other options.
• Early Planning: It's never too early to start planning. Well-prepared businesses can sell faster and for a better price.
• Make Yourself Redundant: Document procedures and define employee roles to make the business less dependent on you.
• Financial Records: Keep your financial records up-to-date. Buyers will want to see at least three years of financial records.

II. Business Appraisal

Setting the right price is crucial. Too high and buyers might be scared off; too low and you might lose out.

• Valuation Methods:
• • Return on Investment (ROI): Sale price = (net annual profit before tax x 100) ÷ ROI percentage.
  • Asset Value: Sale price = assets of the business + goodwill.
  • Market Value: Sale price = turnover x industry multiple.
  • Earnings-Based: Based on profit and cash flow history.
• Market Influence: The final price is influenced by market supply and demand.

III. Build your team

Get help from experienced professionals like business brokers, accountants, and lawyers.

• Licensed Brokers: Only licensed brokers can act as agents for business sales.
• Legal and Financial Advice: Consult with a lawyer specializing in business sales and your accountant.

IV. Transaction Structure and Legal Considerations

Understand the legal aspects and choose the right sale structure.

• Sale Structure: Decide between an asset sale or a share sale, each with different implications.
• Deferred Payments: Ensure security arrangements are in place for deferred payments.
• Key Contracts: Review and ensure key contracts are enforceable.
• Lease Agreements: Check lease agreements to prepare for potential assignment to the buyer.
• Confidentiality Agreement: Use a good quality confidentiality agreement before sharing sensitive information.

V. Marketing the Business and Finding Buyers

Focus on what appeals to buyers and keep the sale confidential.

• Confidentiality: Use general terms in advertising without revealing the business name initially.
• Marketing Channels: Use a mix of online and offline channels to reach potential buyers.

VI. The Offer and Negotiation

Consider all terms of an offer, not just the price.

• Offer Details: Offers should include price, closing date, conditions, payment terms, and any required seller support.
• Multiple Offers: Seek multiple offers to increase the selling price and get better terms.

VII. Due Diligence

Be prepared for buyers to thoroughly investigate your business.

• Information Pack: Prepare a pack with key information about the business, including financial statements, asset lists, customer profiles, and contracts.
• Cooperation: Cooperate during due diligence to make the process smoother.

VIII. Settlement and Post-Sale Considerations

Think about what happens after the sale.

• Training and Support: The sale agreement may include provisions for you to provide training and support to the buyer.
• Restraint of Trade: These clauses prevent you from competing with the sold business for a specified period and area.
• Capital Gains Tax: Consult your accountant about potential tax implications.

In summary, selling a business involves careful planning and preparation, accurate appraisal, help from professionals, effective marketing, thorough due diligence, and understanding legal considerations. By following these steps and seeking expert advice, sellers can ensure a smooth and successful transaction, achieve the best possible outcome while maintaining confidentiality and minimizing disruptions. Post-sale, it's important to consider training and support for the buyer, as well as any legal and tax implications. Need any help?