Preparing to sell your business: 5 tips from a seasoned lawyer

When you’re about to sell your business it’s vital to be well prepared in advance of putting it on the market. This not only avoids costly delays but could also maximize the value of your business…

Get your lease in order

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.

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.

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).

Sort out your important contracts

  • If your business is reliant upon certain key suppliers, customers or employees you should make sure (where possible) that formal written agreements are in place before the sale:
    • convert any verbal agreements into written agreements as soon as possible; and
    • review any existing contracts with suppliers and customers to ensure they are still current, have plenty of time left to run and can be easily assigned to the buyer as this could enhance the value of your business to a prospective buyer.

Decide what you are selling

  • This is a crucial part of any sale of the business and can cause problems if not decided and documented properly at the start.
  • Take appropriate advice and decide whether you’re selling the business or the shares in the company;
  • If the business is being sold, you should prepare a detailed schedule of all the plant and equipment, furniture, etc. that is 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 let the buyer know which (if any) of the plant and equipment is subject to hire purchase agreement or equipment lease, etc.
  • If you are 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, etc.
  • *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 also or lease them to the buyer. Leasing can be useful where vendor finance is involved.

Get on top of your financials

  • You will need your financials to provide to a business valuer to prepare a true and accurate valuation of your business.
  • You also need to make sure you have at 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).

Prepare a seller’s pack

All large companies conduct a sellers’ due diligence and prepare ‘sellers’ packs’ containing all information and documents relevant to the business to give to prospective buyers (often held within electronic data rooms). In any event, you must ensure that your business is tidy and complete and available for inspection when necessary.

This will give the buyer everything they need up front so they can hopefully move quicker with the purchase and potentially increase the sale price.

Preparing to sell your business with GMO business brokers

With so many things to think about, preparing to sell your business can seem a little daunting. As Perth’s leading business brokers we know very well how to keep stress levels as low as possible. We are there to guide you through the whole selling process from start to finish. Our experienced business brokers will assist you with all the legal, structural and financial issues coming your way. If you are in need of any knowledge that we do not have in-house, we will put you in contact with other professionals that can assist with the process, such as lawyers and accountants. We are there to maximize your results.

Contact us to get started with the preparations needed for selling your business.

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