A GUIDE TO THE PROCESS OF SELLING A BUSINESS
The motivation behind selling a business can stem from various reasons. For instance, an offer to purchase the business could prompt consideration. Alternatively, selling might be necessary to invest in a new venture or prepare for retirement. On the other hand, the desire to relinquish ownership of the business could be the driving force behind the decision to sell.
The process of selling a business can be a complex and multi-step process that requires careful planning and execution.
It pays to be prepared when selling your business. The checklist we provide for selling your business encompasses the necessary steps to guarantee a seamless sale process and a justifiable selling price.
Who can assist in the process of selling your business?
These are the key people who can assist you through a business sale:
- Financial adviser
- Business valuer
- Business broker
- Business settlement agent
You will find the role of these key people in our guide for business sale below.
West Perth Legal has assisted many business owners in both buying and selling a business. We work closely with our clients throughout the process. Whether you are a small business or a medium sized business, we provide legal guidance on all aspects of a business sale and purchase.
From contract negotiation to business settlement, we can help. We offer tailored services to suit your needs when buying or selling a business. This includes working with a business broker. Our services are offered at a competitive fixed rate.
Checklist for a business sale
Below is a simple ‘business selling checklist’ to help you understand the process of selling your business.
Here’s our 8-point guide:
- Make the decision to sell
Consider the real reason behind your decision to sell your business to ensure it’s the right path for you.
If it is for financial reasons, would you be better off getting professional advice from a business adviser?
If it is for lifestyle reasons, is there a way to keep the business but restructure the management and leadership? Perhaps you can sell some shares of your company, or perhaps you can bring in additional partners. This will depend on the legal structure of your business and where your assets are held. We suggest that you speak to your accountant and lawyer to discuss how to best exit or partially exit from your business.
2. Prepare the business for sale
Once you decide that selling is the right choice, it is then crucial to ensure that it’s in the best possible condition before putting it on the market. This may include:
- cleaning up your financial records
- improving your business operations
- resolving any legal or compliance issues.
Consider seeking the assistance of your accountant and financial adviser to help you prepare your business for sale. Consider tax implications. Speak to your lawyer to determine what type of legal documents you may need to exit your business, whether you choose to fully or partially sell the business.
3. Determine the value of your business
You’ll need to determine the fair market value of your business and set an asking price.
This typically involves evaluating your financial statements, assets, liabilities, and market conditions.
You may also want to consider hiring a business valuer to get a more accurate valuation. Alternatively, speak to a licensed business broker who specialises in your industry.
Ensure that you understand the range. What is the lowest price you will accept? What is the ideal price?
4. Find a qualified buyer
Once you have prepared your business to be presented in the best light, you can look to find a buyer. You can advertise the sale of your business to potential buyers through various channels, such as:
- business brokers
- online marketplaces
- networking in your industry
You’ll need to screen potential buyers to ensure they are financially capable of buying your business.
5. Negotiate the terms of sale
Once you’ve found a qualified buyer, you’ll need to negotiate the terms of the sale.
This includes the purchase price, payment terms, and any contingencies or conditions.
It’s essential to be clear and thorough during the negotiation process to avoid misunderstandings later. You can hire a lawyer to assist you with negotiating the terms of sale or advise you on the terms you need to discuss with the buyer.
It is also important that during the negotiation process, that you protect your intellectual property, supplier information, client data etc from being disclosed to the public. As such, we highly recommend that you have a Confidentiality Agreement in place with potential buyers. This is to ensure that the other party is aware that any discussions or information disclosed by you during the negotiation process is to be kept confidential.
6. Prepare legal documents
Once the buyer is satisfied with their due diligence, you’ll need to prepare legal documents for the sale. This normally takes the form of a Business Sale Agreement, and this is where a lawyer can assist.
West Perth Legal’s Business Sale Agreement drafting service includes:
- Drafting the agreement to suit your transaction and business
- Access to a lawyer
- Various rounds of amendments
- Quick turnaround
- An agreement that complies with West Australian laws
Alternatively, if you are presented with a drafted Business Sale Agreement or other terms and conditions, our Contract Lawyer can help you with contract review and highlight legal issues for your attention and negotiation.
7. Transfer ownership of the business – business settlement
After both parties have agreed on the terms and signed the legal documents, the sale can be completed and this process is called business settlement. The ownership of the business is formally transferred, including assets and liabilities. And now all necessary financial arrangements, such as receiving payment for the purchase price, must be completed. See our business settlement page for more information.
8. Post-Sale transition
After the sale is complete, there may be a period of transition where you assist the buyer in taking over the business. This may involve training the new owner, transferring customer relationships, and ensuring a smooth handover.
You will also need to ensure you have transferred all leases, licenses and permits as well as cancelled your ABN and transfer or cancel your business name.
The importance of having a legally drafted Business Sale Agreement
A legally drafted Business Sale Agreement is important for the following reasons:
- Once signed, it is legally binding between the parties
- It clearly sets out what is being transferred and each parties’ obligations
- It includes key information of the business
- It minimises the risk of dispute during and after the sale of business
- It ensures that the business is sold in a timely manner and funds are received by the seller when ownership of the business is transferred
West Perth Legal Commercial Lawyers
West Perth Legal is Perth’s commercial law and property law firm. We focus on small to medium sized businesses and individuals doing commerce in Western Australia.
Our Commercial Lawyers and Property Lawyers provide a full suite of legal services for business sale and purchase. We can help you with all the legal aspects of the process. We are cost effective and offer fixed fees for many of our services. Contact us for an obligation free quote.
Phone: (08) 9321 9395