To sell your business quickly and smoothly, and for the highest possible price requires between 12 to 24 months of effort and planning to make the business “sale ready”.
Listed below are some of the key things you should have locked down before you sell your business to maximise its value and attractiveness to potential purchasers.
“Clean” Financial Position
You should have proper, up-to-date financial statements and tax returns. You should have a clear understanding of the loans and other financial commitments that will be discharged or transferred upon sale.
GST – going concern?
GST must be charged on the sale price unless the business is being sold as a “going concern”. This can be a surprisingly technical and difficult thing to determine, especially with commercial and rural property.
Key contracts – clients/ customers & suppliers
Your business may depend on a number of key contacts which may require them to be transferred if you sell your business. Your business is more valuable if these key contracts are locked down and in writing. You will need to manage the way in which you pass the benefit of these contracts to the buyer and you may need to get your client or supplier’s consent.
Your business is more valuable if you have a clear statement of assets that comprise the business and can prove you own them.
Suppliers and customers may register their security interest in an asset or the business as a whole to protect themselves if the business is not able to pay money owed to them. You may be very surprised to discover that third parties believe they own, or have some entitlement to your business assets. This contested ownership needs to be resolved before the sale can proceed.
Commercial Lease Agreement
Most businesses are more valuable – and more likely to be “going concerns” if they can continue trading in the same premises. This will require the landlord’s consent to a new or assigned lease. The sale will fall over if the landlord’s consent is not obtained.
The rights and obligations when dealing with employees can be complicated. Whether employees transfer, or simply have their employment terminated, employees either agree to transfer to the buyer or they can be terminated will most certainly affect the sale price.
Intellectual Property/ Trade Marks
Intellectual property is an important and valuable asset. The better you can prove and document your intellectual property rights, the more valuable your business will be. If there is a key IP you want to retain, you will need to carefully identify and exclude it, perhaps even put in place licence arrangements so the new owner has the use, but not ownership, of your IP.
Tax can be one of the biggest expenses when you are selling a business and a substantial portion of your selling price may be taxed. There are various tax strategies and concessions available depending on the size and structure of the business. Small businesses may be eligible for various CGT concessions while larger corporations may restructure their companies.
Chamberlains can help you ensure all of these things are in place so that you are in the best position to obtain maximum return on your business sale. For more information and advice contact our Commercial Team.