Selling a business can be both an exciting and stressful time. Continue reading this Business Kitz blog to ensure you are as prepared as possible for the sale of your business, with three key considerations for businesses to understand before commencing the sale process.
1. Are You Ready to Sell Your Australian Business?
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, business insurance 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
Selling an Australian business through an asset sale involves transferring specific business assets, such as equipment, inventory, and intellectual property, rather than the entire company. This approach allows sellers to retain control of liabilities and debts, offering a cleaner exit. It can attract buyers seeking to expand or diversify their assets while minimizing risks associated with the existing company structure. Asset sales are flexible and customizable, providing opportunities for negotiation and value optimization. However, they may involve complex legal and tax considerations, making professional advice crucial to navigate the process effectively and ensure a successful transaction.
A Share Sale
In an Australian business share sale, the ownership shares of the company are transferred to a buyer. This method is often favoured for its simplicity, as the buyer acquires the entire business entity, including assets, liabilities, and contracts. Share sales can be advantageous for sellers looking to exit the business entirely and for buyers interested in a seamless transition. However, due diligence is critical, as the buyer assumes all existing company obligations and potential liabilities. Legal and financial advice is crucial to navigate the complexities of share sales, ensuring a smooth and legally sound transaction.
3. What Price Should You Sell For?
Deciding on how much you want to sell your business 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 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.
Our highly experienced solicitors at our sister company, Legal Kitz can provide you with advice that is tailored to your situation, ensuring that your concerns are addressed. You can also request to book a FREE consultation or contact them at email@example.com or 1300 988 954. You can also check out our Business Kitz subscription service today to begin your business with a solid foundation that ensures compliance.