Published on 15/02/2024 by Mary

The ultimate guide to selling your business

Considering selling your small business this year?

With over 80-90% of business owners having their net worth tied up in their companies, doing so could be the key to unlocking your wealth and opening the door to new opportunities.

But preparing to sell your business is no overnight task. To be successful, you need to plan your strategy carefully and get the right support to ensure the process is seamless and hassle-free.

At AnyBusiness, we've been matching buyers with brilliant Australian businesses for years. As experts in the industry, we're going to walk you through everything you need to do to plan your exit strategy and sell your business with confidence.

How to sell a business

Without further ado, let's dive into our guide to selling your business. Here are the six crucial steps you need to consider, from preparing your strategy to the point of sale and beyond.

1. Preparing your business for selling

Everyone knows the importance of planning when running a business. But preparation is just as crucial when deciding to sell.

Before you search for potential buyers, it's essential to plan ahead and tie up any loose ends that may deter potential buyers. To make your business more appealing, you should:

• Clean up your accounting records and ensure they are accurate and up-to-date.
• Engage in dispute resolution with employees, clients, or customers.
• Take care of any unresolved contracts or commercial leases.
• Organise your paperwork and prepare financial records.

When buying a business, a new owner wants to feel like they're starting on a clean slate. If there are any concerns with your business model, you need to address them ahead of time.

It's essential that your documentation paints an accurate picture of your business. Ensure that you maintain reliable records of your financial performance, including cash flows, balance sheets, forecasts, and any outstanding loans.

Doing your due diligence to prepare your business at this stage could be the difference between a sale made and a sale lost.

Pinpointing your reason for selling

In the preparatory stage, it's also crucial that you identify the core reason you're looking to sell your business. Any potential buyers will want to know why you want to exit.

Perhaps you're looking for a new challenge, want to retire, or move to a new location. Whatever the reason, being candid with prospective buyers is essential.

2. Securing a valuation

Before you can start the sales process, you need to know how much your business is worth.

Your business is more than its assets. To find the value of your business, you'll need to consider your revenue, liabilities, reputation, and any staff you employ. When you factor in all these variables, setting a fair price can be challenging.

While there are several ways you can find a rough estimate, such as the price-earnings ratio and business asset valuation method, a professional business appraiser can assess your company and create a comprehensive explanation for its market value.

Working with a professional will add credibility to your offering and make it easier to justify your selling price to potential buyers.

Ultimately, the key is to strike a balance. No business owner wants to undersell their hard work, but if you inflate your business valuation too much, your buyer may believe you're being dishonest. And above all else, trustworthiness is the key to making a sale.

If you're looking for a quick way to estimate your business's worth, try an online business valuation calculator. While this calculator won't consider intangible assets, it's a good starting point to build upon.

Related: The 4 Main Types of Business Structure

3. Finding potential buyers

With the preparations out of the way, it's time to advertise your business on the market.

There is no standard method for selling your company. The right approach for you will depend on the size of your business operation and your goals.

Traditionally, most businesses appoint a broker to handle the sale. That said, in the digital age, there are also ways to market your business online. Let's explore both options in more detail.

Selling your business with a business broker

Working with a business broker is the equivalent of partnering with a real estate agent when you want to sell your home. You'll receive an experienced professional who can offer advice and support you in finding the right buyer contact. In return, you'll need to be willing to pay a commission fee at the point of sale.

You can find a business broker through industry associations, networking, or via an online directory. In AnyBusiness's Broker Directory, you'll find a range of experienced business brokers practising throughout Australia. You can also view each professional's areas of specialisation, allowing you to work with an expert advisor with industry-specific experience.

It's essential to be diligent when searching for the right broker. Choose someone with a proven track record that has relevant industry experience. Always read terms and conditions thoroughly, set up a confidentiality agreement to protect your intellectual property, and clarify a commission price upfront.

How to sell a business online

These days, it's easier than ever to sell your business online. You might choose to leverage digital marketing on social media to proposition qualifying potential buyers. Alternatively, you could list your business on a specialised marketplace.

Selling via a business listing site offers several benefits. It's easier than searching for potential buyers manually and is often more affordable than partnering with a broker. As a bonus, you'll remain entirely in control of the process from start to finish.

AnyBusiness's online directory offers an easier way for you to discover serious buyers for your business. Simply choose a listing period, fill out essential information about your business, upload any critical imagery, and start marketing to interested buyers.

When choosing the right online listing site, it's important to pick a website that specialises in business transactions. Doing so will ensure you only encounter serious offers, and it will also make screening buyers easier.

Related: Small business, social media and the benefits

4. Closing the deal

Finalising the deal is the hardest part of any business sale. It's crucial you make all of the terms and conditions of the agreement explicit so that both parties know what to expect.

Once you've made an arrangement with a buyer, you'll need to draft a contract outlining all sale details. It's always recommended to partner with a professional solicitor who can look at all of your critical documentation and help you compile it into a contract. Key documents include:

• The bill of sale
• Contracts and agreements
• Asset lists and transfers
• Reps and warranties
• Transition time and work agreements
• Employment agreements and continuity
• Noncompete agreements and clauses
• Intellectual property transfer

Once your documents are finalised and everyone understands the terms, provide a contract for your buyer to sign so you can close the deal.

5. Navigating the transition period

The process of selling your business doesn't end at the point of sale. Once you've agreed on the terms of your deal, the buyer will want to verify all of the information you've provided and do their due diligence to review any details.

To ensure this process goes smoothly, establish a comprehensive succession plan outlining critical information. You'll need to inform your buyers about critical financial processes, vendor relationships, your organisational structure and employee information so they know what to expect.

Authentic communication goes a long way here. Be transparent about any ongoing projects and challenges you're facing. This lays the groundwork for a positive post-sale relationship and ensures you set the new business owner up for future growth.

Related: Cyber Security: A Real Threat to Big and Small Businesses

6. Post-sale considerations

Once a solicitor has finalised all of your legal documents and the contract is signed, you've officially sold your business.

At this stage, you've earned a well-deserved break, but there are still some key things you need to think about before you take a step back. Consider the following:

• Tax obligations: Once the sale is made, you'll need to consider whether you're liable for or are owed any outstanding tax. Assess whether Goods & Service Tax (GST) and Capital Gains Tax (CGT) apply to the sale. In addition, check whether your state or territory has any special requirements.

• Employees: It's crucial to inform your employees that they'll be working under a new owner or that their employment will end due to the business's sale. In either case, giving your employees adequate notice is essential.

• Customers: Remember to communicate the change in ownership to your customer base. Assure them that the business will continue to provide the same great standard of service they expect. This helps maintain positive post-sale relationships and propels the new owner to success.

Related: If your business has changed, so have your tax obligations

How to sell a business privately?

While finding a business broker is the most popular exit strategy, you may consider selling your business yourself, especially if you already have a buyer lined up.

Opting for the private route and handling your affairs without support can offer several tangible benefits, such as:

• Maintaining control over negotiations from start to finish.
• Avoiding broker fees and commission costs.
• The ability to tailor the sales process to meet your goals and timeline.
• Direct communication with business buyers
• More straightforward confidentiality management

That said, selling privately is often more time and labour-intensive. And without the expertise of brokers and solicitors, business owners may face challenges in areas such as valuation, negotiations, and legality. It's also essential to have the right tax information relevant to your situation.

If you're interested in selling your business to a private seller but lack the expertise to handle all contracts, agreements and legal considerations, a good middle ground is establishing a private listing on a specialist platform. This lets you maintain control and lower the cost of selling while receiving valuable support from a team of committed professionals.

Related: Why Do You Want to Own a Business in Australia?

How to sell a business quickly?

Whether it's unforeseen circumstances, personal finance reasons, or market volatility, sometimes you need to sell your business quickly.

Expediting your business can help you mitigate risks, capitalise on new market opportunities, and transition to a new business idea quickly. In this section, we'll reveal 5 top tips to speed up the sales process.

1. Start with realistic expectations

If you're looking to sell your business quickly, it's important to start with realistic expectations. Even fast sales rarely happen overnight. You'll still need to put in the work to make the sale happen, and your time to sell may vary depending on the current market.

2. Competitive valuations and pricing

Acknowledge that a quick sale might involve trade-offs, such as lowering your purchase price to compete with similar businesses or being open to flexible terms. Aggressive valuations with competitive prices are great for attracting qualified buyers looking to snap up a great deal. If you want to sell fast, be willing to price your business competitively.

3. Targeted marketing and advertising

When it comes to expediting the sales timeline, targeted marketing reigns supreme. Let the right people know that you're looking to sell. Whether it's spreading the word via your industry network or listing your business to interested buyers on a specialised marketplace, being strategic in your approach is the key to quick sales.

4. Direct outreach

If you're trying to make a sale quickly, waiting for offers to come to you can be a huge time-sink. Instead, try propositioning potential buyers directly. When you reach out to qualifying individuals, you can gauge interest and start negotiations immediately.

Selling a business when in a partnership

For businesses structured as a partnership, there are some more unique challenges to navigate. A business partnership is a legal structure where two or more individuals or entities run a business together with shared responsibilities, resources, and profits.

Rather than selling the business outright to another party, the seller usually gives the other partner(s) the option to buy their share first. How much your share is worth depends on a variety of factors.

The consent of each partner is crucial, and the terms of the partnership often dictate how the sale proceeds. Valuation can be complex, especially when considering not only tangible assets but also other factors like goodwill and intellectual property.

This makes it a multifaceted process of financial assessment, negotiation, and legal consultation, not as straightforward as other business sales.

It's a good practice to have an agreement with your partners in place ahead of time to help with a smooth transition that benefits all parties.

AnyBusiness: Sell your business with confidence

If you're looking for an easier way to sell your business, AnyBusiness is the solution you need.

On our intuitive platform, you can market your business privately without having to go through a business broker. That means lower costs, direct negotiations and more control.

Prefer to use a broker? Browse our directory today to find the perfect match for your business.

Whatever your goals, AnyBusiness has a solution to make your exit strategy seamless. If you'd like to find out more, don't hesitate to get in touch.

Mary

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