Below are our business sale tips. These are not in order of priority but reflect some of what our team of Brisbane Commercial & Business Lawyers have learnt in acting in the sale and purchase of businesses for more than a couple of decade.
Up to date “clean” financial accounts
So often copies of accounts from business enterprises have to come with caveats about particular abnormal items. Get these items tidied up before you put your business on the market. Take a look at the Balance Sheet and Profit & Loss, step back from it and ask if you would pay the desired price for the Net Assets reflected the Balance Sheet and the Net Profit those assets produce. If not, why not?
Your will need full financials for the last few years and the ability to produce up to date management accounts for the year to date.
What are you selling? Business Assets or Business Entity (with assets and liabilities)?
There is a growing desire for sellers to want to sell their corporate entity rather than the business assets. However buyers usually desire to buy the assets. Take tax advice (from your accountant) before you start to market your business on the different tax treatments of either option so that know in real terms what the net value to you of an entity sale as opposed to an asset sale is.
Whether you are selling the entity or the assets, have an asset list (and assign working values to them)
- Distribution Rights
- Plant & Equipment (what is owned and what is being paid off)
- Goodwill – Customer List, Av Sale per Customer / year, Business Names, Trade Marks, Web Sites, Mailing List (how many)
- Stock / consumables
Who do you owe money to, how much and on what terms? What security do your lenders hold over assets that are intended to be sold?
Are there fixed interest rate facilities that need to be broken? (Ask your financier to confirm – in writing – what they are).
Cross check: Are the Assets & Liabilities on the Balance Sheet.
Have an up to date full copy of your Lease (with all variations). Consider seeking to negotiate further options to renew with your landlord before you put the business on the market. A good time to do this is at the time of exercising an option to renew. That is, you say to the landlord, I will exercise this option to renew if you give me another option to renew. Remember the Lease needs to be Varied in writing to reflect this agreement. Security of tenure can have a significant effect on the value of your business.
All “Material Contracts” clearly documented
The value of your business will be linked to repeatable reliable profitability. This is in part linked to the clarity of the terms of your key contracts including:
- Distribution / Licence Agreements
- Employment Contracts (with your staff) and Contractor Engagement terms
- Customer Contracts (Terms & Conditions)
- Key supplier Contracts
- Intellectual Property Licence Agreements
Do a “S.W.O.T.” analysis, as you can be sure the buyer of your business will
- What are the the strengths of your business? Why would a buyer pay money for your business rather than that of a competitor?
- What are the weaknesses of your business? If you were the buyer of the business what would you want to know about it?This application of the “do to others as you would have them do to you” (golden rule) will help you make “full and frank disclosure” that will protect you against claims of being misleading.
- What are the unique opportunities for your business? What is the “blue sky” upside for the business?What are the opportunities for the development of the the business under new ownership and management? Why haven’t you exploited those opportunities?
- What are the threats to your business?
For more information regarding Business Sale Tips
Please contact our Business Development Team or call us on (07) 3252 0011 to book an appointment with one of our specialist Commercial Lawyers today.
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