A simple guide to selling your business

The decision to sell your business is a hard one that requires a lot of thought. In this Business Kitz blog, we will explore the steps to selling your business and whether it is a good idea.

Before you make the decision to sell your business, careful consideration must be given to decipher whether it is in your best interest to sell your business. In order for you to do so, you must have a comprehensive understanding of what occurs when selling your business and the possible outcomes. Here is a step by step guide to selling your business:

Make a decision

You must establish a clear reason for selling your business. This is not only to ensure that it is the right decision for you but also because it is commonly asked by potential buyers. Therefore, having a well articulated reasoning will increase the likelihood of someone purchasing your business. Financial issues are some of the common reasons why one might consider selling their business. It is important to recognise that closing down a business or selling it is not entirely free of cost. More often than not, you will be required to pay employee entitlements or tax amounts from asset sales. 

Should you hire professionals to sell your business?

Hiring professionals will ensure that you fully understand the legal and governmental requirements to avoid any pretending fees. In addition, they can help negotiate the sale price of your business. It is a good idea to budget any legal costs you may incur in the near future. 

What part of the business are you selling?

If you are a larger organisation or have multiple ventures, you will need to decide if you are selling your entire business or a portion of it. Here are a list of options you may want to consider when selling your business:

  • Are you selling your entire business inclusive of all your assets?
  • Are there any assets you wish to retain?
  • Do you wish to have rights over your business name or do you intend to sell the rights as well?
  • Do you intent to sell the intellectual property rights (IP)
  • Do you wish to sell any physical assets such as property? 

What is your business value?

In essence, this refers to the monetary value of your business i.e, how much is your business worth? This is an integral component you will need to figure out when planning to sell your business. This can be done in numerous different ways. Here are the three most common ways of valuing your business (valuation):

  1. Market analysis: To gain an understanding of where your business stands, it is a good idea to analyse the current market situation. You may also want to assess any businesses that were recently sold. While this is not a formal evaluation, it does provide an insightful guide to your valued market price.
  1. Business net worth calculation: Make a note of your assets and liabilities. Assets can be divided into two categories. This includes tangible assets such as machinery, building and land) and intangible assets such as brand recognition, intellectual property and goodwill. 
  1. Return on investment (ROI): Evaluate the net worth of your business to decipher the value of your business. 

Find buyers to sell your business to

Selling your business can be a long and tedious process so its best to start as early as you can. Advertising your business to potential buyers is a good idea to get the word across. The potential advertising methods include:

  • Word of mouth.
  • Existing networks such as your own family members, friends, colleagues etc.
  • Customers or your business.
  • Marketing through social media or other traditional forms of media.

Sale negotiation 

Once you have successfully found buyers, it is time to negotiate the terms and conditions of the sale. It is important to remember that the information that you provide in this instance should be completely accurate and any falsification may be considered misleading. If you are unsure about the legal measure that you should be taking, contact our sister company Legal Kitz for more information. Both the seller and the buyer should come to a mutual agreement. Here are some of the clauses you may need to consider:

  • Sale price.
  • Deposit amount.
  • If the buyer requires any training (training period).
  • Existing staff negotiation.

Contract preparation

Once you have reached a final agreement, it is now time to draw up a contract to make it official. If you require any legal assistance to do so, contact Legal Kitz.  In some instances, contractual obligations will restrict you from starting a new business or trading within the same market as the business you sold. This is to ensure that you are not directly competing with your sold business. To have a better understanding of the terms and conditions, contact Legal Kitz. 

 Legal advice 

Check out Business Kitz subscription service today to access our full range of legal, commercial and employment documents to begin your business with a solid foundation that ensures compliance. If you are unsure about how to best protect yourself and your future business, our sister company, Legal Kitz can assist you. To arrange a FREE consultation with one of their highly experienced solicitors, click here today, or contact us at info@legalkitz.com.au  or 1300 988 954.

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