How-to guide: Selling your business
Selling a small business is a massive decision that has significant financial ramifications. So, whether you are selling for retirement, a good payday, or having had enough of running a business, you'll need to put in a solid plan to make it work. If you are considering selling your small business, this how-to guide will provide an overview of the process from start to finish.
Selling a business can be a complex process, as it involves transferring ownership of a company, its assets, and its liabilities to a new owner. There are many reasons why people sell their small businesses; it could be time for retirement or an opportunity to sell at a reasonable price. For others, it could be a lack of interest, financial difficulties or the business not turning out as expected. Whatever the reason, selling your place takes time and effort, and you must do it right.
If you sell your business and things need to be done correctly, there can be numerous problems down the line. Most sale agreements include lengthy terms and conditions, and if breached, you may be at risk of being sued by the buyer or facing other legal issues. If issues arise with the handover, or you provide misleading information, you could be fined, or some of the money you earned from the sale could be withdrawn. Finally, if the sale of your business is mishandled, it could damage your reputation and make it more challenging to do business in the future.
To sell your business the right way, getting the right help and following the tried and tested path is important. To get started, here are some steps you should follow:
Step 1: Confirm your objectives for selling
Before you begin selling your small business, it is essential to figure out why you want to sell and how much money you are hoping to make. Knowing your motivations can help keep you focused throughout the sales process and attract the right buyer. Additionally, setting realistic expectations regarding your business's sale price can help ensure the transaction goes smoothly. If you are selling because you have had enough of running the company, you'll want to find a buyer with no expectations of you staying on after the sale is complete. Similarly, if you need money right now, you will want to find a buyer happy to pay cash, not in stock for the business. List down your priorities and non-negotiables and use this to drive your decisions throughout the sale process.
Step 2: Obtain professional support
After you have clarified your goals, it's time to get advice from qualified professionals such as accountants or lawyers. This will help ensure that you know all the laws and regulations related to selling a business in Australia and that you have the best chance of achieving a successful sale. Look for professionals with experience in the type of business you operate or in attaining the outcomes you are looking for. You may even consider bringing on a broker to help sell your business. Brokers typically have access to more potential buyers than a single owner can find, and they know how to market a business effectively. Additionally, brokers understand the complexities of selling a business and can provide valuable guidance throughout the process. The right lawyer, accountant or broker involved in the transaction should more than pay for itself. Online legal services like Sprintlaw are a great option as they provide high quality services for a fraction of the cost.
Step 3: Prepare an information pack
For potential buyers to make an informed decision about purchasing your small business, they will need detailed information about its operations and financials. This information should be compiled into a clear information pack that outlines all aspects of the company being sold. The memorandum should include everything from financial statements and operating records to customer lists and supplier contracts. It would help if you also considered obtaining an independent valuation of your business which can be used when negotiating with potential buyers. This readily available information makes it easier for buyers to assess the value of your small business before making an offer.
Step 4: Promote your business for sale
Once you've got all the paperwork, it's time to promote your business for sale. This can include placing ads in newspapers or magazines, listing your business on online platforms such as Flippa.com or using a broker who specialises in buying and selling businesses. You could also reach out directly to people interested in buying your small business. Create a list of competitors, former employees or customers who may be interested in purchasing your business and reach out to them. Many companies will likely sell to someone they know or have competed against.
With careful preparation and due diligence, any owner can successfully navigate the sales process and move on to whatever life may bring after that point. By understanding why you want to sell your small business in Australia, seeking out experienced assistance from brokers, and putting together an informative information memorandum for prospective buyers, you'll be well on your way towards finding success with selling your small business.
Business Sale FAQs
What is involved in selling a business?
Selling a business involves preparing the business for sale, valuing the business, finding a buyer, negotiating a sale price and terms, and transferring ownership to the new owner.
How do I prepare my business for sale?
Preparing your business for sale involves getting your financial and legal affairs in order, making sure your business is profitable, creating a detailed business plan and marketing strategy, and addressing any issues or challenges that may impact the value of your business.
How is the value of a business determined?
The value of a business can be determined by several factors, including the company's assets, revenue, profits, market share, industry trends, and growth potential. A business valuation expert can help determine the value of your business.
What are some common mistakes to avoid when selling a business?
Common mistakes to avoid when selling a business include not preparing the business for sale, overvaluing or undervaluing the business, not finding the right buyer, not having a solid exit strategy, and failing to transfer ownership to the new owner properly.
What is the best way to find a buyer for my business?
There are several ways to find a buyer for your business, including using a business broker, advertising the sale online, contacting potential buyers, and attending business networking events. A business broker can help you find a qualified buyer and manage the sales process.
When selling your small business, ensure you get advice from qualified professionals, prepare financial records, and promote your business through various channels such as newspapers, online platforms or brokers specialising in buying and selling businesses for maximum exposure. With these steps taken into consideration, you should be able to find the right buyer for your small business in no time.