1. CONFIDENTIAL CONSULTATION
The first step in the business sales process is considering the possibility of selling your business. You should consider the types of questions you are likely to receive from potential buyers of your business:
- What type of business do you own?
- Who are your customers?
- Do you have contracts with your customers?
- How many employees do you have?
- What is your role in the business/ how involved are you in the day to day business operations?
- What is your annual revenue?
- What is the net profit of the business?
- How much do you pay yourself from the business?
- Is your business declining, in growth or stable?
- Is there any particular reason why you are considering selling at this time?
- Do you have any customers that make up more than 20% of your revenue?
2. REVIEW YOUR FINANCIAL INFORMATION
Before you release your financial information to us, we can sign a confidentiality agreement if you require us to (regardless of this we always keep your information confidential as a matter of course).
Have your last three years of financial statements and a current year to date profit and loss statement ready to go. You should understand what your total owner’s income is including your salary, benefits, and perks such as owner motor vehicles.
Take a look at the trends in your business and be prepared to answer questions from interested parties about the business to get a full picture of the growth opportunities for the business. Other items include the approximate value of the assets of your business, including inventory, equipment, and so on. Some businesses may require a specialist Plant & Equipment valuation to enable a market sale price of the overall business to be estimated (for example, an fixed assets-heavy business such as a road freight business with trucks or similar).
3. DECIDE ON YOUR POTENTIAL ASKING PRICE
In addition to the financial information, potential buyers will want to get a good understanding of your business. They’ll want to know how you compare to your competitors, what’s unique about your business and what are the growth opportunities. This information will be used by savvy buyers along with your financial information to compare your business to what other similar businesses have sold for.
Every business is unique, but buyers will compare your business to other similar businesses to decide how much to offer you for the business, so you need to be within a range of buyer’s expectations.
You should talk to your accounting advisor and they can assist you with this as well of course.
4. CREATE A BUSINESS PROFILE & ADVERTISING CONTENT
You should create the following documents and information packages about your business:
- Business Profile: This is a comprehensive overview of the business, including financial information, business history, business assets, industry data, and more. It is designed to provide a comprehensive understanding of the business to a potential buyer, but does not contain your intellectual property or any highly sensitive information. The Information Memorandum is only provided to potential buyers once they have completed a Confidentiality Agreement that you ask them to complete (make sure you have a Confidentiality Agreement template to use).
- Online Advertising: The online advertising does not identify your business name or specific location. It provides a generalised snapshot of your business sufficient to generate interest from an enquirer who will then contact you to discuss further and complete a Confidentiality Agreement. You can use that first contact to begin learning more about that potential buyer.
It’s your business, and no one knows it better.
5. ADVERTISE & MARKET YOUR BUSINESS
As part of the Advertising Package option, Sell My Business Now will advertise and market your business in many places. We advertise on Seek for Business, Businesses for Sale.com, Businesses for Sale.com.au, Anybusiness.com.au, Bsale, and Sell My Business Now. I
This will get your business in front of hundreds of eyeballs across Australia, with an audience actively looking to buy businesses now.
6. BUYERS BEING ENQUIRING
As enquiries come in from the advertising online, you will make contact with the interested parties, ask them to complete your confidentiality agreement (at your discretion), and then provide them with further information.
7. PROVIDE DETAILS TO POTENTIAL BUYERS
Typically you’ll need to have many potential buyers that you are in contact with before you find ones that are the right fit to acquire your business. They need to have the right skills, motivation, and want to acquire your specific business. Once they have the details on your particular location, products, or services, they may or may not be a fit to go to the next step in the process of selling your Business.
8. INITIAL Q & A WITH BUYERS
If there is initial interest from a qualified buyer, you can then discuss the business with them and answer any questions that they may have. You’ll also get a feel for their timeframe and motivation as well as a greater understanding of why they are interested in your business specifically.
9. MEETINGS & DISCOVERY TOURS
This is an excellent opportunity to find out more information on both sides. It’s also an opportunity to see if you can see this person taking over your business. So while they are deciding whether they are interested, you can also make up your mind on the potential buyer as well.
We recommend that you be open and honest about your business. It’s good to be optimistic and positive about what your business has to offer. However, you also want to point out areas where you think a new buyer could improve on what you have done and give them ideas for potentially taking the business to the next level. Buyers will usually want to know about the expertise of your staff, your customers, suppliers, your role in the company, and so on. Even though they have a lot of this information, they usually want to get more details directly from the seller before making an indicative offer to buy your business.
10. BUYERS SUBMIT NON-BINDING INDICATIVE OFFERS (WHICH WE ALSO CALL ‘EXPRESSIONS OF INTEREST’)
Once buyers have enough knowledge and answers to their questions, you will find out which ones are serious enough to make a non-binding written offer. You should go over each offer received with your accounting advisor and discuss not just the price offered but other items such as the terms of the sale, due diligence requirements, and how likely you think the buyer is to close on the deal. You should take into account whether they need financing or not and their interest in moving quickly, and more.
11. NEGOTIATE OFFERS
If you have several offers, you may decide to focus on the best one or two to see if you can negotiate terms with one that will be most likely to close on the deal and see if they can provide terms that are acceptable to you. In addition to price and terms of the payments, you will also need to discuss how long of a transition period they want, what due diligence they will be performing, and what are their plans for running the business. What is included in the sale may be a point of negotiation such as accounts receivables, payables, inventory, and also whether they intend to take on the current employees of the business, for example.
12. SIGN NON-BINDING OFFER / EXPRESSION OF INTEREST
Once the key terms of the offer are negotiated and agree to ‘in principle’, then both sides will sign the non-binding Expression of Interest (EOI) / Offer. The buyer will usually have a period of 30 to 60 days to complete due diligence. A signed Expression of Interest will often stipulate whether the buyer has an exclusive period during this time where only they can pursue the business while both of you are investing time in the due diligence process (this would be normal).
13. DUE DILIGENCE
The amount of due diligence that each buyer requests does vary depending on the size of the deal, the buyer’s background, and the available information. If there is financing involved, then the financier / bank will also require due diligence information. Usually, the buyer will have their accountant review information and request information from the seller and their accountant. In addition to the financial information, they will want their lawyer to view any contracts that the seller’s business has with suppliers, customers, and employees.
Some information may be particularly sensitive for your business. For example, often customer identifying information will be de-identified / redacted even during the formal due diligence process, as the customer identifying information is to only be provided on final contract signing or, in some cases, on settlement of the transaction. How this is dealt with differs depending on the sensitivity of this information and the industry.
Due diligence is designed to confirm that the business is what was stated to the potential buyer from the seller. In addition, they want to see if there are things that could cause problems for the new buyers, such as any legal issues, work health and safety issues, or any recent concerning performance trends. During the review process, the buyer and their lawyer and accountant will have questions. When the information is reviewed, and the questions are answered to the satisfaction of the buyer, the next step in the business sale process is for the lawyers to negotiate the final contract of sale.
14. NEGOTIATE PURCHASE AGREEMENT
More often than not, it will be the seller’s lawyer that will draw up the contract of sale and send it to the buyer’s lawyer for their review. The buyer’s lawyer will go over any issues with the buyer, and usually, they will request some changes to the final agreement. Normally there is a give and take between lawyers and buyer and seller with any final terms to be negotiated.
Once the issues are resolved, the final step in the business sales process is to set up a closing date.
15. SETTLEMENT (COMPLETION) & TRANSITION
Once the final form of the Contract of Sale with all negotiated sale terms has been negotiated, then it will be signed by the seller and buyer. Often these days this can happen electronically.
Congratulations, the deal is signed! Now you will usually be working directly with the buyer on operational matters to be ready to Settle on the date agreed for Settlement, and to be ready for the transition to new ownership.
The lawyers for the seller and buyer will coordinate on all legal steps required for the transaction to settle / complete on the agreed Settlement Date. That is the date when money and ownership changes hands.
The seller will typically provide a transition period that has been negotiated where they will help the buyer take over the functions of the business and assist in understanding the customers, products, services, and employees. The transition period can vary from a few days to several years, depending on the needs and desires of both buyer and seller. If the transition period is longer than a month or two, than typically a salary is negotiated before the closing where the seller will be paid depending on how much they plan on working. Often it starts as full time and moves to part-time. Then the business is handed off fully to the buyer who operates the business on their own after receiving training from the seller.