Checklist for Selling Your Business

It is crucial to be well prepared when selling your business and this business selling checklist includes everything you need to do to ensure a smooth business sale.

Initial Steps

Make sure you are ready – Selling your business is a big deal so ensure you are financially and emotionally ready to sell your business.
Speak with your accountant – It’s a good idea to notify your accountant on your intentions to sell and ask them for advice regarding your tax obligations, you don’t want to be caught out with an unnecessary capital gains tax bill because you didn’t structure the sale properly.
Determine how you want to sell – Decide whether you want to sell privately or with the help of a business broker

Preparing Your Business for Sale

Financial Documents – profit and loss statements, BAS statements, accounting ledgers and an outgoing costs breakdown must all be brought up to date and ready to go.
List of tangible assets – prepare a list of tangible assets such as vehicles and equipment which will be transferred as part of the business purchase
List of intangible assets – prepare a list of intangible assets such as websites, trademarks, business names which will be transferred as part of the business
Procedure manuals and policies – having proper procedures documented will allow potential buyers to easily visualise themselves taking over the business and gives them confidence that goodwill will be transferred
Perform a stocktake – this is important if stock is not included in the business selling price as the buyer will need to prepare additional funds to takeover your stock
Decide on a value – There are a number of ways to value a business but for most small to mid size businesses (up to 5 million revenue), the most accurate way would be a market appraisal from a business broker would be the best option.
Check the lease – make sure the lease period is long enough to satisfy any potential buyer and talk to your landlord about extending it if it isn’t.
Information Memorandum – Preparing an information memorandum will allow potential buyers to quickly assess whether the business is suitable for them. Things which should be included are a business summary, organisational structure, market data etc.
Non disclosure agreements – In the vast majority of cases, you’d want to keep the sale of your business confidential so you will need to draft up a non disclosure agreement to make sure the information you disclosed remains private
Determine who your buyers are – it’s important to figure out who will be the likely buyers for your business so you can formulate a marketing strategy to get your business in front of them

Putting Your Business on the Market

If you are using a business broker, then they will completely handle this part of the process. If you are selling the business yourself, then you need to prepare the following –

- Write business for sale ad – The ad should highlight the primary strengths of the business and disclose just enough information for a buyer to determine whether they would like to make an inquiry but not enough information for them to identify the business
- Start advertising business for sale – getting your business for sale ad seen by more buyers increases the likelihood of it being sold. You will want to use a mixture of paid and free business for sale websites, social media and also direct email campaigns to reach potential buyers
- Respond to inquiries and vetting buyers – always get potential buyers to sign non disclosure agreements before disclosing further information and providing the information memorandum. Do your best to respond as buyers as quick as possible – providing information in a timely manner is crucial when selling a business since buyers have many business opportunities to choose from
- Organise meetings – once you’ve established and vetted buyers, it’s time to organise meetings with the ones which want to proceed to the next stage

Final Stages of the Selling process

Meetings with Buyers – this is an opportunity for the buyer to ask the owner questions to learn more about the business, try to be precise when answering questions without saying too much unnecessarily and avoid overselling
Heads of agreement – Speak to your solicitor to draft up a heads of agreement, although the agreement is usually non-binding, it does set out the terms of the sale so both parties have an understanding of where they stand going into due diligence
Due Diligence – You should nearly have everything you need for the buyer to perform due diligence if you prepared the business for sale properly. Depending on how long the process has taken to get to this step, some documentation may need to be brought up to the current date
Negotiate the sale – Once you’ve found the right buyer, you’ll need to work out the details of the transaction. This will include information such as the sale price, settlement details, and any additional clauses. You need to be willing to be reasonable, flexible and also willing to hold your ground on certain things. This is where having a good business broker skilled in the art of negotiation is helpful.
Contract of Sale – Get your solicitor to draft up a sales contract, the buyers side will likely want to add a few additional clauses to protect the buyer so the process is likely to go back and forth a few times before the final terms are drafted
Exchange of contracts – Once terms are finalised, both parties will sign and an exchange will be made (usually subject to a few requirements being met)
Settlement – Congratulations, this is the final step of the process and you can now move onto a new chapter of your life.

Steven Ung

I'm the owner of Business Brokers Sydney and have many years experience as a business broker.
Feel free to call me for a free consultation if you are looking to sell your business.