When you decide to sell your business it is crucial you understand what steps you can take to get the highest price for your business. Getting this wrong can leave many thousands of dollars on the table, money better in your pocket.
Equally important to the actual sale price is the time listed on the market, plus the terms and conditions that come with the deal.
The first thing that any business owner needs to know is what your business is worth.
What You Need to Do as a Seller
Have Your Business Appraised
As a private seller, you have a few options to determine a fair asking price when listing your business for sale.
- Calculate your business value yourself
- Ask your accountant
- Arrange a formal business valuation from a Registered Business Valuer which will cost money
- Engage a business broker
Business brokers can provide a price guide and develop strategies and tactics for supporting the asking price and then also manage the terms and conditions using their experience when negotiations commence. Brokers also may have direct reference and insight with comparables, and understand current demand and what is happening in the market.
Research The Market Yourself
If you were about to sell your house or even a car, generally you would research by going online seeking comparables as a point of reference. Websites like BusinessSales.com.au or similar sites could be a way for you to start understanding what your business might be worth. Be mindful though that there are so many variables that can affect a sale price which listing sites don’t have. Asking prices are often very different to sales results.
You can also search online for blogs, newsletters or reports that might provide information on how to price your business. You might find benchmarking information or online appraisal tools. These, though, are just a guide and don’t replace Business Brokers, Registered Business Valuers or Accountants. Remember the information could also be outdated and not relevant, so be sure to check the source and date.
Write A Great Advertisement For Your Listing
This step is when you go LIVE and your business is offered for sale. If the advert and the images are attractive you are far more likely to get an enquiry, which is the first step towards selling your business.
The difference between a professional and attractive advert and an emotional “please buy my business” advert can be all the difference to finding the best buyer in the shortest time. You can use our AI ad writing tool to help you write a compelling advert.
A well-written advert will cover the type of business that is for sale, what is included, and why it is a great business and do so without saying what the business name or location – therefore protecting confidentiality. Including revenue and profitability figures (if a highlight) often leads to more buyer enquiries.
Websites like BusinessSales will help you with an innovative way to list and showcase your business to attract better buyers plus provide you with the tools you need to manage a confidential sale process.
If you choose to hire a professional business broker they will write and prepare your listing and can manage the confidentiality process on your behalf.
Buyers may look at several adverts and businesses, so you need your advert to be compelling to have buyers wanting to enquire and find out more.
Get Professional Assistance
If you are unsure that you will be able to get the best price for your business and handle the sale, then using an experienced business broker is a great idea. At BusinessSales we work with Australia’s top business brokers, in fact, one of our co-founders is the former president of the Australian Institute of Business Brokers and the National Business Broker of the Year. If you’d like an obligation free introduction to a professional business broker in your area please give us a call on 1300 77 NEXT (1300 77 6398)
Business Owners sometimes choose to sell privately to save on broker fees and commissions or because they have enough experience to manage the process, but in our experience, a good business broker will cover the costs of their services. Their experience might be the difference in keeping a potential deal together.
A good broker will help you from the outset with an appraisal, how and what is needed to prepare for sale, prepare marketing and an information memorandum and understand what else buyers and their advisors might need or want through the sale process.
How to engage with buyers
Once a buyer has signed a confidentiality deed you can let them know your business name and location and share your Infomation Memorandum.
As a seller, you should treat every buyer as genuine until they prove otherwise. It’s your job (or your business brokers) to help them understand your business and why they should buy your business instead of another opportunity.
Buyers will be looking at all the tangible information that comes with discovery and the overall process but they also are looking for indicators they can trust you and/or appointed business broker.
The more you invest in getting to know the buyer the more you can share about the business as it might relate to their previous skills, experience and working life plus if you know why they are looking for a business like yours it helps align their wants and needs to the business.
A transparent and genuine relationship between the parties will make all the difference when it comes time to receive, manage and negotiate the sale price, terms and conditions.
The information and discovery process
As the saying goes – Prior Preparation Prevents Poor Performance.
Business Brokers generally use an Information Memorandum or similar to showcase all the general aspects of the business. This is usually offered after a confidentiality deed has been signed by the buyer.
The level of information provided will depend on the business size, type and scale. This document is designed to provide a good amount of information but not details that could be sensitive in nature like names and contacts of staff, suppliers, customers etc.
You can see a sample Information Memorandum here.
Whatever format is used it should contain the basics such as;
- The strengths and opportunities of the business
- The history and profile of the business
- An overview of staff including owners
- Lease and property details
- Plant and equipment included in the sale and the approximate value
- 3 years’ financials (profit and loss statements) and year-to-date (if available)
- The value of the stock at cost
- Any qualifications, licences or considerations that are required to run the business
- Industry-specific information, depending on the industry and business.
Whilst the advertising may attract an initial enquiry the information memorandum is often the first point of reference where the buyer learns the name and location of your business, what is for sale and ultimately why they should buy your business.
A good information memorandum will showcase your business in much more detail and highlight the business benefits, strengths, and opportunities. The financials, the history, the team, the assets, the lifestyle, the growth and opportunity etc must be conveyed transparently and in a manner that will be confirmed when the buyer progresses to an inspection or meeting with the owner.
You can prepare this document yourself or an Information Memorandum is included in our silver listing package if you choose to hire a professional business broker they will do this for you!
If you have a business that has been purposefully systemised and documented, buyers will in most cases respond favourably. Systems provide clarity, transparency and efficiency within a business (this is one of the reasons franchises have been such a successful model over the years). A business with operations manuals, induction and training manuals means there is consistency and other benefits such as accountability and responsibility.
Having your business in order with things such as bookkeeping, accounting, payroll, systems, filing and invoicing, contracts and agreements, etc. will all add to the look and feel of the professionalism of the business and provide confidence for a buyer.
Buyers will not likely invest time and money (with their accountant) until they have really understood this step, perhaps asked for some general questions and in some cases come to inspect the business and meet the owner. Once a buyer starts engaging with their accountant or even talking to their bank, you should be confident the buyer is serious.
Negotiation and Getting the Deal Done
There will come a point where the buyer has received all the information, asked questions, had an inspection or two and their accountant has reviewed all the financials. It is always good to know if the buyer has finance arranged or if that needs to be completed on top of this process – the sooner finance is arranged the better. Getting finance can be time-consuming and challenging we recommend buyers contact an experienced commercial finance broker (not a residential mortgage broker).
Once you’ve given the buyer your information you should be asking if they are ready to make a conditional offer. It’s best to get an offer sooner rather than later, even if it’s non-binding. This allows you to review the offer and decide if it’s worth negotiating or if the offer is not worth considering and you can use your time to speak to other buyers.
If you’ve hired a business broker their experience and negotiation expertise will be valuable in the negotiation phase. Business brokers may have other buyers to work with or provide support and defend the asking price or bridge the differences to help both parties achieve a great mutually beneficial outcome.
Either way, the process from this point needs to be completed efficiently to prevent something brokers call “deal fatigue” where the amount of time and effort kills the deal. Solicitors should be notified and promptly provided with all the information required so they can prepare a contract of sale and all that might go with it. If a property is being sold with the business this may involve a business of sale contract, a freehold property contract and a lease.
Once contracts are issued, both parties should have agreed on the terms and be ready to sign, after which both parties are bound by the contract. The terms of a business sale contract will vary depending on the business, complexity of industry and finance type. If training and transition are part of the deal this is also specified in the contract.
Being prepared and using an experienced commercial lawyer will help you negotiate the best price and terms and importantly avoid deal fatigue.
Next Steps
Selling your business can be tough, but so are you.
We’re here for you, whether you want some professional guidance to keep you on the right track, or one of our trusted professionals to take the reins – you can count on us to keep you and your business moving.
Thinking about selling your business?
Let’s face it selling your business can be tough.
Anything worthwhile is!
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Are you wondering, “How do I sell my business?” If you don’t know where to start or how to move forward with the sales process – we’re here to help.
We can help you work out who and how to best sell your business whether that be selling your own business yourself or hiring a professional business broker.
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