The process of selling a business
Presumably you’ve bought a business (unless you started one from scratch), so you may think you’re in a good position to sell your business. But flipping the sales process on its head, switching from buyer to seller, is actually a big change in mindset.
Selling a business takes time, energy and know-how. Thousands of businesses change hands every year with varying levels of success. To get the sale you want with the best result, you need to understand the process of selling a business. There are four main steps to maximising your returns when selling a business – planning, marketing, negotiation and the sale itself.
Step 1: Planning
Planning is critical in the business sales process and it is usually the most time-consuming part. It’s about knowing who your potential buyers are, what they look for in a business, and how best to present and pitch your business to them. Business buyers are primarily looking for cashflow, good systems and a business with a future, so it’s important to prepare your business for sale by reducing unnecessary expenses and increasing sales to improve cashflow. Formalise all your business systems and processes so the business is less reliant on you, allowing for an easy transfer to a new owner.
Step 2: Marketing
Finding the right business buyer can take time. You may be tempted to cast the net wide, but evidence shows, you’ll get the best result if you target your marketing efforts to the most likely potential buyers. Make use of networks and popular business for sale websites, with possibly some print and database marketing. Interested parties will need to be screened to determine if they have the sufficient funds, skills and commitment to buy and run the business. Only qualifying buyers should get to sign a confidentiality agreement and gain access to more detailed information about the business.
Step 3: Negotiating
Once you have an interested and qualified buyer with an offer, you can begin negotiating. Determine what’s important to you and work with your team (such as your accountant and lawyer) to set any conditions for the sale. Only accept offers made in writing on a standard Sale and Purchase Agreement and use this as the basis for your negotiations. The agreement sets out the price, terms and conditions of the offer, and will usually be dependent on the purchaser completing due diligence to their satisfaction. Work with your team and the buyer to satisfy any concerns so you get the best deal and a satisfactory offer.
Step 4: The Sale
Once both parties have signed the contract there are usually conditions that need to be satisfied. The process of due diligence is where the purchaser, along with their accountant and lawyer, examine the business in more detail and verify all the information provided. This process normally takes between 10 and 20 working days to complete, depending on the availability of information and complexity of the business. Work with the buyer to help satisfy the conditions of the offer. Once satisfied the contract is declared unconditional by the purchaser’s lawyer, and the business is sold.
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