Thinking it’s time to sell your business? When you’re about to sell your business it’s vital to be well prepared to sell your business in prior to putting it on the market.
Preparing to sell your business is not like preparing to sell a house. A business is a complex and ever-changing asset potentially including consumers, management and staff, stock, intellectual property and good will.
Using our top 5 tips to prepare to sell your business will not only assist you in avoiding costly delays but will also enable you to maximise the value subsequent asking price of your business.
- Formalise all agreements
If you lease premises, it’s important to review your current leasehold arrangements and determine:
How long is left to run?
- If your lease has expired and you’re holding over or if there is only a short period left to run, you should consider negotiating a new lease or an extension with your landlord before you sell your business.
What are the assignment conditions?
- Your landlord could withhold consent to the assignment of lease if these conditions are not satisfied, so it’s important to be aware what they are and what the landlord can ask for before you sell your business.
Do you fully understand your lease?
- It’s always worth understanding where you are at with your term, options, rent and other obligations so you can summarise these to a potential buyer. (A commercial lawyer can prepare a lease review for you to form part of your due diligence as well as identifying anything unusual or onerous).
Further to this, if possible, ensure that agreements with staff, consumers and suppliers are up to date and relevant. Being across that status of all agreements and their importance to the business shows good management and provides security to all potential buyers when you sell your business.
2. Use an experienced and expert broker to support you in preparing your business for sale
Assist your innate understanding of the business with an independent and experience expert in selling businesses, such as a broker when it’s time to sell your business. When preparing your business for sale, you want to have the time to focus on running the business as professionally and smoothly as possible. This is essential when potential buyers are valuing your business. They will also expertly guide you step by step through the selling process, ensuring that your businesses value is maximised.
3. Decide what you are selling
- This is a critical component of preparing to sell your business and can cause issues with potential buyers if not clear from the beginning of the selling process.
- Take appropriate advice from experts and decide upon whether you’re selling the business or simply just shares in the company;
- If the business is being sold, you are required to prepare a detailed schedule of all the assets that are included in the sale as well as a separate schedule of what is excluded. The included items should be valued so there is no dispute down the line.
- You must inform the buyer which (if any) of the plant and equipment is subject to hire purchase agreement or equipment lease, etc.
- If you’re unsure a commercial lawyer can conduct a search for you at the Personal Properties Securities Register.
- You should be one step ahead in contacting the relevant companies and obtaining discharge certificates or arranging for the transfer of the hire purchase agreements.
- If you agree to sell something free from encumbrances which later turn out to belong to a third party, you could be liable to the buyer for damages.
- If you own your business premises you should consider whether to sell these or lease them to the buyer. Leasing can be useful where vendor finance is involved.
4. Prepare your financials to sell your business
- You will need to provide your financials to a business valuer in order to prepare a true and accurate valuation of your business in order to prepare to sell your business.
- You also need to ensure you have at the very least 3 years (preferably audited) profit and loss statements and balance sheets to provide to any potential buyer (subject to execution of a tight confidentiality agreement, of course).
5. Prepare a seller’s pack
All businesses for sale need to conduct a sellers’ due diligence and prepare ‘sellers’ packs’ containing all information and documents relevant to the business to give to prospective buyers. In any event, you must ensure that your business documentation is tidy and complete and available for inspection when necessary when selling your business.
This will give the buyer everything they need up front, so they can hopefully move quickly with the purchase of your business for sale and potentially increase the sale price.