Twelve Things to Know When Selling a Business

If You're Selling a Business, This Is What You Should Know

Selling a business is a complex process that requires careful planning and preparation. There are many key considerations that business owners need to keep in mind when selling their business, from understanding their financials, taxes when selling a business to protecting their confidential information.

Cristian Marcu, Principal of ELDAD Property Group interviewed Adam Mantell from Rudd Mantell Accountants to talk about what business owners should consider if they are thinking about selling their business.

1.     Understand your financials - First and foremost, it is essential to work with your accountant and understand your financials. Before selling your business, you should have a clear understanding of your revenue, expenses, and profitability. This information will help you determine the fair market value of your business and ensure that you receive a fair price when you sell your business.

2.     Prepare an Information Memorandum - To prepare for the sale, it is recommended that you work with your accountant and broker to prepare an information memorandum. This document should outline key details about your business, including financial data, product or service offerings, and key clients or customers. It is important to involve your accountant and broker in the preparation of this document to ensure that it is accurate and complete.

4.     Be prepared for due diligence - During the due diligence process, potential buyers may discover issues that you were aware of but had not dealt with. It is important to be prepared for this and to address any issues before the sale. This can help ensure that the sale goes smoothly and that you receive a fair price for your business.

5.     Be prepared - Preparation is key when selling a business. You should ensure that your business, accounting systems, and bookkeeping systems look clean to any potential buyer. If your accounting system looks messy, potential buyers may think that there is something wrong with your business. You may consider hiring a bookkeeper to ensure that your accounts are clean and organised.

6.     Have contracts in place - Having contracts with clients, suppliers, and key staff in place is also important when selling your business.    These contracts should allow for the sale to happen and for staff to transition over with the business. You should also review your client and supplier lists and remove any deadwood. This will help ensure that the business is attractive to potential buyers and that you receive a fair price for your business.

7.     Know your costs - Another factor to consider when selling your business is costs. You should review your expenses and remove any subscriptions, overheads, or expenses that you do not need. This will help increase your profitability and make your business more attractive to potential buyers.

8.     Be realistic about valuation - When selling a business, it is important to have a realistic valuation based on market research and industry standards. You should be willing to negotiate with potential buyers to ensure that you receive a fair price for your business.

9.     Know your buyers - Identifying potential buyers and developing a strategy for reaching out to them is also important when selling your business.

10.  Protect your information - You should protect your confidential information by requiring potential buyers to sign a non-disclosure agreement before sharing sensitive details about your business. Your business broker will help with this and the whole sales process, including marketing the business and negotiating with buyers.

11.  Know your tax implications - Before selling your business, you should be prepared to provide detailed information about your business, including financial statements, tax returns, and legal documents. You should also consider the tax implications of selling your business and consult with a tax professional to minimise the tax impact.

12.  Plan for transition - Finally, it is important to plan for the transition period after the sale. This may include transferring ownership, training new owners or staff, and communicating changes to clients and suppliers. By planning for the transition period, you can help ensure that the sale goes smoothly and that your business continues to thrive under new ownership.

As Cristian and Adam discussed, selling a business is a complex process that requires careful planning and preparation. By working with your business broker and accountant, understanding your financials, preparing an information memorandum, and addressing key considerations such as your unique selling proposition, due diligence, and costs, you can increase your chances of selling your business at a fair price and ensuring a smooth transition to new ownership.

Selling a business is a major decision that should not be taken lightly. It is important to understand the complexities of the process and to work with experienced professionals to ensure that you achieve your goals. By following these key considerations and seeking the guidance of experts in the field, you can successfully sell your business and move on to the next chapter of your life with confidence.

Get more information on What is a Business Broker from our site and if you are considering selling your business, contact Cristian Marcu from ELDAD Property Group for a confidential discussion on how to best position your business for sale.

You might also like our interview with Adam Mantell on Key Steps and Tips for Selling a Business