Selling your business can be a daunting and a very stressfull process. Getting ready to sell and understanding the process will help reduce this anxious time. Make sure you have a business broker that beleives in your business and the saleablity and will guide you through the process.
10 STEPS ON SELLING A BUSINESS - INFORMATION TO BROKER
It is always important to have all your information compiled as this enables the smooth process of supplying data to potential buyers. All information provide must be facts – profit and loss figures, lease documents, sales history, outgoing costs, a list of plant and equipment, staff information. A broker will then compile an Information Memorandum that has all data compiled in one easy to read and professional document.
- CONFIDENTIALITY
Any information provided to a potential buyer should only be supplied after a confidentiality agreement has been signed by the buyer. This protects your information and the misuse of information exchanged.
- REVIEW / INSPECTIONS
Once the buyer has been provided with all relevant information, and if further interested they will want to inspect the business. Sometimes this can be difficult if the sale of the business is unknown to staff and will need to be handled discreetly. This is also an opportunity for the buyer is confirm the information that is supplied by the broker in their Information Memorandum and have a look behind the scenes. This is the benefit of having a broker as they can control this situation and ensure this option is only given to genuine buyers.
- NEGOTIATIONS
This can be one of the most difficult processes of the sale. To ensure that the buyer has a full understanding of the seller’s expectations.
- OFFER
Once the buyer is satisfied and wants to secure the business, it is best if, and the offer is submitted in writing outlining the price, type of purchase (cash or subject to finance) and conditions.
- CONTRACT
At this stage, it is best to have a commercial solicitor to review the contract and advise of any changes. In Queensland, we have the REIQ Business Contract which incorporates the standard business conditions. Of course, this is always a one fits all and typically additional clauses will have to be added in as Special Conditions.
- DEPOSIT
Deposit monies can held in a Trust Account by the Seller’s Agent or the Solicitor’s Trust Accounts. Deposit amounts can be agreed upon and doesn’t necessarily have to be 10%. All depend on the price of the business being purchased and time to settle. Part deposits are also an option. A contract is not valid without a deposit being paid.
Many Buyers are concerned about losing their deposit monies if the sale goes through. This all depends on whether the sale is being terminated as per the conditions of the contract. Legal advise is always best sought is unsure.
- SATISFACTION OF CONTRACT CONDITIONS
This is the time that both Seller and Buyer work together with the aim of the contract conditions being satisfied. Conditions usually include:
- Finance approval
- Due diligence
- Lease acceptance/assignment
- Franchisor/ landlord approval (if required)
- Environmental (if a service station)
Once these conditions are satisfied and confirmed by the Buyer, then the contract becomes unconditional.
- PRE-SETTLEMENT
Before settlement, there will be issues that will need to be addressed for the takeover to occur.
- Franchisor or Seller training
- Staff employment
- Customers and suppliers notified
- Transfer of utilities
- Insurances
- Branding changes (if required)
- Business name changes
- Bank accounts
- Stock ordering
Pre-settlement is not limited to these issue as can vary depending on each business and business type.
- SETTLEMENT
Before settlement, the stocktake is carried out, and we always advise to get professional stocktakes to do this. This amount is then provided to the solicitors to be able to account for at settlement.
The solicitors will not only make adjustments for the settlement amount of the stock but can also include change floats, pre-paid accounts, staff entitlements and rates.
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