Selling a business can be both an exciting and stressful time. To ensure you are as prepared as possible for the sale of your business, we’ve outlined the three key things you should consider before commencing the sale process.
1. Are you ready to sell your Australian businesss?
Before selling your Australian business, it is prudent to first ‘tidy up’ your business to place it in the best possible position to sell. This typically includes the following:
- Protecting your intellectual property by registering your business name and trademarking your business logo
- Ensuring your business is complying with relevant legislation, regulations and industry standards
- Making the business as financially-enticing as possible by reducing debt and ensuring accounts payable and receivable are updated and accurate
- Speak to your accountant about getting a business valuation
- Prepare a business sale opportunity document
You should also start preparing and collating documentation that may be required for the due diligence process. This will include a variety of information that a purchaser may deem relevant to the operation of the business, for example financial statements, contracts, leasing and employee arrangements and disclosure of any legal action by or against the business.
2. What are you selling?
A business is made up of many parts, therefore it’s important to consider what exactly you would like to sell. A business can be sold in one of two ways; as an asset sale or a share sale.
An asset sale
An asset sale is where the buyer purchases some or all of the assets owned by the business, for example the stock, equipment or the right to occupy the premises.
A share sale
Alternatively, a share sale involves the buyer purchasing shares in the company instead of assets. In this kind of transaction, the composition of ownership will change when the business is sold, but the physical assets will remain the same. There are advantages and disadvantages of each kind of sale, so it is important to consider what is best for your individual business.
3. What price should you sell for?
Deciding on how much you want to sell your business for can be a tricky process, but receiving a valuation can assist with this process. To determine the value of your business you can choose to receive a valuation from either your accountant or from a business broker. An accountant will base their valuation on financials such as assets, liabilities, income and expenses of the business, whereas a business broker will take into account other important factors such as market conditions and business market share.