Preparing to sell your business

Once you've decided to sell your business, there are many things you can do to maximise the financial return from the sale, ensure business continuity and make the process less stressful.

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Alternatives to selling your business

There could be several reasons why you've decided to sell your business, for example:

  • to raise finance for other investments
  • you have lost interest or have no work/life balance
  • the business is not making enough profit
  • the impacts of COVID and/or natural disasters are too challenging
  • because you've decided to retire.

If you'd prefer not to sell your business, read more about the alternatives to selling your business.

Prepare your business for sale

Once you've decided to sell your business, take some time to think carefully about:

  • why you're selling
  • your goals for the future
  • what you can do to get your business into the best shape possible before the sale.

You're less likely to get the price you'd like if:

  • your business is looking tired, dirty or unpresentable
  • you need to sell the business quickly for financial or personal reasons
  • your business is not making a profit.

Top 10 tips to prepare your business for sale

  1. Try to give yourself as much time as possible to prepare your business before you advertise it for sale.
  2. Look for ways to reduce your costs and improve your profit position.
  3. Build a strong management team to help the new owners through transition.
  4. Maintain high-quality products and services and actively manage your reputation.
  5. Update and expand your online presence.
  6. Keep your business premises clean and tidy and make sure the business assets, like equipment, are in good working condition.
  7. Consider signing shorter-term or longer-term leases – whichever makes your business more attractive to your potential buyers.
  8. Use formal, written contracts to secure customers and suppliers rather than informal handshake or verbal agreements.
  9. Develop or update business, marketing and succession plans to enable your staff to run the business when you sell it.
  10. Settle any outstanding legal, taxation or superannuation matters (e.g. warranty claims).

Inform others about your decision to sell

Before you list your business for sale, you have to communicate and start negotiations with major stakeholders in your business such as:

  • investors
  • lenders
  • creditors.

Also consider informing the following people of your decision to sell before it becomes public knowledge:

  • employees
  • loyal clients
  • suppliers
  • distributors
  • manufacturers.

Being open about your decision:

  • gives you the opportunity to explain your decision and address possible concerns
  • reduces speculation, assumptions and uncertainty
  • may provide you with additional support through the process
  • makes it easier to ensure business continuity through the transition period
  • could generate interest from these stakeholders to buy your business.

Decide what to sell

Before you list your business for sale, you need to decide what to include in the sale.

Tangible assets

Tangible assets are:

  • physical assets, like property and equipment
  • assets with a clear and current monetary value (like accounts receivable).

When deciding which of your tangible assets to include in the sale, ask yourself the following questions:

  • Is there a rental bond on the premises that will be paid out?
  • How much money is owed to the business by your debtors?
  • Can you sell the business 'as is' (including everything you use to operate the business in the sale)? This would enable you to ask for a higher price.
  • Do you want to keep any of the assets (e.g. a vehicle)?
  • Would selling assets before you sell the business, give you a higher return? Or would you be able to use this money to pay business debts, thereby making your business more attractive to buyers?
  • Do you owe money on any of the assets? If so, you must use proceeds of asset sales to settle the debt.
  • If you own both the business and the building (freehold), will you include the building in the sale?

Intangible assets

Intangible assets are non-physical assets that have a monetary value because of their potential to create income, for example:

  • goodwill
  • brand recognition
  • intellectual property (IP), such as patents, trademarks, and copyrights.

These assets can significantly increase the value of your business and attract more buyers.

When deciding which of your intangible assets to include in the sale, ask yourself the following questions:

  • Will you sell your IP associated with the business? This may mean that you won't be able to use the same IP again.
  • Can you sell the customer or membership database? Be sure to check the relevant terms and conditions and privacy considerations.
  • Do you have any signed contracts with remaining term that represent a monetary value that can be included in the sale?
  • What goodwill and brand recognition have you built up that can increase the selling price?

Selling through a business broker or real estate agent

A business broker or real estate agent can make the sale of your business less stressful and time-consuming by:

  • helping you prepare the financial and legal documents
  • preparing a sales prospectus
  • providing a market evaluation
  • promoting the sale
  • co-ordinating inspections for potential buyers
  • qualifying potential buyers to ensure they'll be able to meet the price
  • negotiating the deal that is in your best interest
  • helping you understand legal selling contract requirements.

The broker will:

  • require you to pay for marketing activities
  • take a percentage of the sale price as their commission.

Choosing a business broker or licensed agent

If you decide to sell your business through a broker or agent, it's important to find someone who:

  • has your best interests in mind
  • has the right experience and expertise
  • will help you get the price you're after and negotiate the best exit arrangement.

Before deciding on an agent or broker, find out:

  • what their online presence says about them—do some research and read reviews where possible
  • how their fees are structured
  • if they specialise in a particular type of business
  • how many businesses they've helped clients buy or sell
  • if they've ever owned a business
  • if they can provide testimonials
  • how many clients they're currently working with, and if they have time to properly represent your business
  • what strategy they would suggest for the sale of your business, and if that aligns with what you're looking for.

You'll also have to decide if you want to give them the exclusive rights to sell the business, or if you prefer giving multiple agents the opportunity to sell it for you. Having more than 1 person looking for buyers has advantages, but agents can also be less motivated if they don't have the exclusive listing.

Selling your business yourself

If you decide to sell your business directly to a potential buyer, you will need to:

  • prepare marketing material
  • know where and how to market the business to potential buyers
  • decide if you will sell the business as is, or sell assets beforehand
  • collate business financials for at least the past 3 years
  • prepare a sales prospectus
  • obtain an external third-party evaluation to ensure you are listing the business for sale at a realistic market value
  • have the skills to validate and qualify the buyer has the financial capacity to pay the price you are seeking to sell the business for.

It is important to understand that it can be time-consuming and stressful to sell your business yourself, especially while operating the business as well.

Read more about finding buyers and completing the sale of your business.

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