Thinking of selling your business? There are a number of key areas to consider in this process to achieve a commercially desirable outcome whilst establishing sufficient safeguards for yourself as a vendor.

selling a business

Valuation of the Business

The first step to preparing your business for sale would be to obtain a valuation of your business. This will involve speaking with your accountant or financial advisor who will make an assessment of the value of your business on factors such as the performance and profitability of the business, stock in trade, plant and equipment, intellectual property rights, goodwill and the lease for the premises (if any).

You may also discuss issues such as the transfer or termination of employees. The existing staff are terminated with the vendor as the purchaser takes over, but may be offered employment with the purchaser as the new owner. The availability of this transfer arrangement may impact the purchaser’s perceived value of the business, as retention of key personnel might be necessary to conduct training and handover to the purchaser, as well as maintaining relationships with suppliers and existing customers which forms part of the goodwill.

The sale of a business and assets also entail tax implications, for taxes such as the capital gains tax, the goods and services tax if your business is not being sold as a going concern, and any stamp duty (depending on the State in which the business is located), which is payable by the purchaser. It would be advisable to consult an experienced accountant who should be able to nominate the apportionment of the purchase price between goodwill and assets in a way that is beneficial to your tax liabilities.

What are you selling?

As a vendor, it is important to have a clear idea of the assets you are selling and the scope of your obligations under the transfer of such assets. This will assist in a more accurate communication of the purchaser’s entitlements under the sales contract, which would reduce the risk of later claims by the purchaser based on misrepresentation or misleading and deceptive conduct.

Understanding your obligations involved in the transfer of certain assets may also save delays and headaches down the track. The non-compliant vendor may become liable under standard warranties such as the clause providing for unencumbered rights, titles and interests to the purchaser. In order to avoid such a breach of warranty, you may want to check the Personal Property Securities Register to ensure that there are no existing securities over any personal property such as plant, equipment and vehicles and that a discharge has been arranged for any relevant mortgages and charges over the lease.

Time

Finally, one of the most important but often overlooked factors which can assist in a successful sale of a business is time. Giving ample time to allow for the assessment of your business, its performance and market position and finding the right buyer who is willing to pay the right price may take a little longer than expected. Not leaving enough time to sell may mean that you may be more exposed to any market volatilities and may not derive the maximum benefits of a well-timed exit from the market.

Furthermore, the planning and execution of the necessary steps within the negotiation and settlement process may pose some delays which could have an adverse impact on the vendor. Namely, there are often preconditions within the sales contract that needs to be satisfied prior to settlement. For example, the contract may state that settlement cannot occur unless the lease for the business premises and certain supply agreements have been successfully assigned to the purchaser.

In order to ensure that your business can put its best foot forward, it is a good idea to always keep proper records of all the affairs of the business and consult experienced business brokers and/or legal and finance professionals to ensure that you are well covered in all the technical aspects. By planning ahead and accessing the right resources available, you can be sure to be looking out for your best interest in what could otherwise be a daunting and time-consuming process.