What can I be expected to do when selling my business?
Determine the sale price of your business. There are a number of factors taken into consideration to value your business. Some of these factors include the turnover, goodwill, brand equity, location, customer base, market share, future growth of the business, the number of years established, and so on. You should liaise with your accountant and perhaps a broker for guidance on putting a figure on your business.
Advertise your business for sale. There are many forms of advertising available and it is always prudent to shop around and do your research.
Deal with interested buyer enquiries. Potential buyers will ask a lot of questions about the business and want to perform due diligence, which is the process whereby an interested buyer will investigate the financial, legal and daily operations of the business. Before releasing any information about your business, we recommend that you arrange for a potential buyer to sign a confidentiality agreement, which we can draft for you.
*See a more detailed explanation of Due Diligence in our Purchase of Business FAQ’s.
What documents do I need to show the buyer when selling my business?
Some of the common documents required to be exchanged, disclosed or provided to the buyer of the business to enable them to undertake their due diligence include:
Financials – tax returns (3 years), bank statements (3 years), balance sheets (3 years), accounts receivable/payable lists; owner’s salary, financial forecasts, stock inventory and cost price, and obtain a valuation of the equipment and fixtures.
Legal – building leases, licenses, patents/trademarks or other intellectual property, employee agreements and records of employment, franchise agreements, business registration (ABN), contracts/agreements, insurance policies and current loans/agreements.
Business – marketing plans, business procedures, employee manuals, training manuals, vendor and customer database, equipment servicing receipts, website details and statistics.
So how will the sale of my business happen?
Rockliffs Lawyers in Sydney will obtain detailed instructions from you and prepare a Contract for Sale of Business which will be provided to the purchaser. After all the negotiations have been made and the Contracts signed, the Contracts will be exchanged at which time the purchaser will usually provide a cheque for the deposit. After the exchange of Contracts, the Contracts will be legally binding. Prior to settlement, you will be required to fulfil a range of obligations outlined in the Contract for Sale of Business.
There are standard obligations that you must perform and then there may be obligations in the special conditions that you may also have to consider and perform including:
- Execution of relevant documents so ownership can be transferred to the purchaser;
- Maintaining the goodwill of the business;
- Discharging securities, mortgages or any other encumbrances that may be held over your business; and
- Obtaining (if applicable) the lessor’s consent to the transfer of the lease of business premises to the purchaser.
At the settlement stage, there are certain documents that may need to be exchanged which pass ownership rights to the purchaser and the purchaser will provide bank cheques or deeds in return.
If you are thinking of selling a business, get in touch with Stephen Rockliff who is an accredited specialist in Business Law or one of our other experienced business lawyers at Rockliffs Lawyers located in Sydney CBD.