How to Formally Close and Sell Business In 7 Steps

Wrapping up a meticulously built enterprise and selling it off can be emotionally distressing and challenging. Entrepreneurs spend years to create...

  • How to Formally Close and Sell Business In 7 Steps
    Lucas Nguyen Image Lucas Nguyen

    How to Formally Close and Sell Business In 7 Steps

    • Updated: Tuesday 2nd of March 2021
    • Selling

    Wrapping up a meticulously built enterprise and selling it off can be emotionally distressing and challenging. Entrepreneurs spend years to create a brand and keep working on its growth to position it as an established entity. However, when it comes to handing it over, they are often unable to get the desired value. Thus, if you plan to sell a business in Australia, you need to prepare for the sale.

    On average, the sale of a business takes six to twelve months, and you need the assistance of a professional team comprising a lawyer and an accountant for the same. It is essential to get the required help because the process can be challenging to complete without any support. Also, you need to get the organisation ready for the acquisition. Here are a 7-step closing and selling procedure that will help you find a suitable buyer and get the right price for your business.

    1. Plan Your Exit and Future Course of Action

    The entrepreneur must be thoroughly certain about selling and must have a solid reason for it, such as retirement, relocation, health concerns, new business plan, etc. Planning your succession is the first step towards the selling process. You should not think about getting rid of the company simply because the profits are going down or you are bored with your routine.

    In these circumstances, it can be harder to make the entity look like a lucrative deal to the buyer. Also, you need to figure out how you will invest and utilise the profits made from the deal. Ensure that you are mentally prepared to make an exit so that you do not develop cold feet when signing the contract. Let your accountant and attorney guide you in making the decision.

    2. Preparing Documents for the Sale

    Putting the paperwork in order is vital to attract qualified buyers. It includes arranging the financial documents, bank loan papers, and tax receipts for the past three to five years to be provided to the buyers for due diligence. You should have a list of the equipment and stock that will be included in the sale. The documents should be able to convince the buyer about revenue growth.

    Also, you need to organise all the other papers that will be required for the acquisition, such as the lease contract, machinery purchase bills, employment contracts, list of suppliers, financial projections, permits and licenses, etc. All these documents must be up to date and placed in chronological order.

    3. Evaluate the Cost of Your Business

    Putting a price tag on the business can be confusing and complicated. It requires the interference of professionals who can conduct the exact valuation of the venture. Also, the entrepreneur is not the right person to do the final pricing as he/she is emotionally attached to the enterprise. Conversely, a business appraiser can do the job with accuracy and professionalism.

    The valuation is dependent on the current price trends in the marketplace and the industry. It comprises a correct calculation of the cost of the assets, intellectual property, and goodwill. The accountant will also take the debts, depreciation rate of the equipment and assets into consideration while determining the right amount. You must make sure that the company is neither overpriced nor being listed at a bargain rate.

    4. Improving the Appeal of the Business

    The company has to present an enticing proposition to the potential buyers to motivate them to make the purchase. If the business is performing well and has everything in place, the chances of a quick sale enhance immensely. On the other hand, if it appears neglected and undergoing a downswing, the buyer may not show interest in the deal. Thus, you must work on giving the office a makeover, get the machines and the fixtures serviced by professionals, deep clean the premises, etc.

    In addition, the entrepreneur must work on increasing profits to improve business performance during the closing period. The accountant can help in suggesting ways of cutting costs and making higher profits. It will help in luring the right buyers and getting maximum value for the venture.

    5. Marketing the Business and Screening the Buyers

    Putting the business up for sale has become effortless with the help of business listing websites. You can simply provide the details of the business and get an advertisement made for it. The best part about marketing through this medium is that it will be viewed only by interested buyers who intend to acquire and no other random people.

    After the enquiries start pouring in, you must begin screening them to shortlist the qualified candidates. Contact them and understand their financing, past experience, and requirements. Provide them with the executive summary of the business and other documents so that they can conduct the verification and research work.

    6. Negotiating the Deal

    The entrepreneur and the buyer have to negotiate on a number of things besides the final price. They need to be on the same page on the amount of the deposit, asking price, handover period, training time, stock at value, transfer of lease, and licenses and permits. After these details are discussed, and the price of the sale is confirmed, the lawyer will draft the legal contract.

    If you are unable to negotiate on the price, you can call off the deal at any time before the signing of the contract and look for a better offer. The contract must be read by both the parties and duly signed by them in the presence of the lawyers.

    7. Streamlining A Smooth Transition

    After the deal is sealed, the entrepreneur has to inform all the involved people about it, such as the employees, shareholders, suppliers, and clients. You will have to introduce the new owner and transfer the lease and the licenses and permits. All the intellectual property, assets and business documents will be handed over to the buyer.

    The business name will have to be transferred and the existing ABN will have to be cancelled. The new details will have to be shared with the ATO and the tax obligations related to selling must be followed. You will then have to train the buyer in the operations and management and acquaint them with all the ongoing and past projects and the key people who work on them.

    Conclusion

    The selling of your venture is a significant decision, which takes a lot of time and effort. Thus, if you plan to sell a business in Australia, you must use this 7-step approach to complete the process smoothly without any hassles or upheavals.

  • Author Info Lucas Nguyen

    Lucas Nguyen is an immigration expert with loads of experience of working in public sector and as an in-house lawyer. Lucas graduated with a Bachelor of Law and Master of Law in Global Business Law from La Trobe University. His sole aim is to provide best legal services, to his clients, on complex Australian Immigration Laws and commercial transactions. His association with Business2Sell is not new, and we welcome him as our guest author.

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