How To Sell A Business: The Process To Follow

How To Sell A Business: The Process To Follow

Step 1: Make It Look Good

If you have the time up your sleeve, the first thing you want to do is to make your business look as attractive as possible for sale. That means having all your accounts tidy and up to date, your processes documented and streamlined, your customer base identified and well serviced, and all of that backed by a strong team and software systems.

When your business looks like an attractive, profitable prospect, then it is likely to attract more potential buyers. For more information on this vital first step of how to sell a business, check out our recent blog which goes into how you can make your business look attractive for sale in greater detail.

Step 2: Talk to the Pros

Selling a business can be complicated and you don’t want to undersell its worth. So, if you aren’t sure how to sell a business or you haven’t done it before, it is strongly advised to seek expert advice from a professional who specialises in business sales.

The first recommendation would be to talk to an accountant (like the team here at Drumm Nevatt and Associates) as they will be able to understand the intricacies of your financial position and can give informed advice on how to maximise the potential of your business sale. They will also be able to advise of any tax implications or payments you may incur with the sale.

Step 3: Prepare It

Once you have done the work to make your business look like an attractive going concern and sought expert advice, it’s time to prepare the various elements for sale. The first thing you’ll need to prepare is your financial records and documentation. That should include:

• Financial statements
• Tax records
• Contracts
• Licences
• Asset records
• Lease agreements

Step 4: Value It

By assembling your financial records and conducting comprehensive market research, you should be able to set a sale price for your business. While you might feel your business is very valuable, it will only be worth what someone is willing to pay for it. Depending on the type of business you are selling, much of the sale price could be based on goodwill and future earnings, so sometimes it can be hard to determine a value.

That’s why, this is another aspect you may wish to seek professional advice on to ensure the amount you choose is in line with the current market and the true value of your business.

Step 5: Decide Your Sales Approach

How will you sell your business? You could choose to sell it independently, or use an experienced business broker who knows all the in’s and out’s of how to sell a business successfully.

This decision may be guided by the value of the business, a larger business sale may be better suited to the expertise of a business broker, whereas a lesser valued business could be sold privately.

Selling Yourself:

If you choose to sell yourself, there are plenty of places you can advertise your business. You could list it on TradeMe, offer it in online business groups, speak with local contacts, or share it with your network of industry contacts.

Use a Broker:

Business brokers are experts when it comes to how to sell a business and can take the stress out of the process for you. Chat with a number of brokers to see what their strategies are, what their terms and conditions might be, and what kind of commission they will collect before deciding on who you think will be the best option for your needs.

Step 6: Find A Buyer

All the prep work is complete, so now it’s time to find a buyer. The first thing you’ll want to assemble is an information pack with all the vital details about your business. Include an indication of financial performance, key features, growth potential, and any unique selling points. This pack can then be distributed to potential buyers personally or via your business broker.

Note: Before disclosing this information, you will likely want to have potential buyers sign a Non-Disclosure Agreement (NDA) to protect your sensitive information from reaching the public.

Now, it’s time to advertise the sale. If you are working with a Broker, then they will do some of this for you. But, if you aren’t, consider TradeMe, Marketplace, social media and your own professional network. You could also make the offer to your customers or clients, they may love your business so much that they are keen to take it over!

Just make sure you screen everyone thoroughly so you don’t end up with time wasters!

Step 7: Negotiation

Throughout this process, you should only be dealing with buyers who are serious. So, respond to those that have queries and who might be requesting additional information. Let those serious buyers do their own due diligence by reviewing your financials and other documents.

Ensure you are available to meet with the potential buyer to discuss the sale in greater detail, address their questions and negotiate the terms of the deal.

Step 8: Finalise The Sale

Once you have selected a suitable buyer, it’s time to finalise the finer details of the sale. Negotiate the final terms, like sale price, payment structure, training periods, handover dates and any contingencies.

When all the terms are finalised, form a legally binding purchase agreement. This is a step where you will want to engage expert help to ensure that the agreement is in the best interest of both parties and that you are protecting your interests.

It is important to also check with your accountant so that you fully understand the tax implications of selling, both for your personal circumstances and the business.

Step 9: Hand Over

The sale is not complete once the money is in your account. The final step is completing the handover process, where you’ll provide training and support to the new owner. Also, ensure you have changed the ownership of any assets, contracts, licences or other legal documentation.

Then, notify your employees (if you have not done so already), suppliers, customers and other stakeholders about the change in ownership.

Step 10: Decide Your Next Steps

What will you do now? Got a new business idea percolating? Maybe you have your eye on purchasing a new venture? Whatever your path, it is best to seek expert advice to make sure you are setting yourself up for future success. So, book a time to chat with our team of business advisers today for quality advice you can trust.

Time to sell? Then, you want to maximise the potential of a good sale price and ensure you select the right buyer. Our team of business advisors can help you do that. Get in touch with us today to discuss how to sell a business and how you can best position your business for sale.

Book a time to chat with the team now.