Selling a business in Australia may seem straightforward, yet taking the time to grasp the entire process beforehand is crucial. This preliminary step ensures you find the right buyer, secure an optimal price, and steer clear of any unexpected complications.
Regardless of your business type, familiarising yourself with the process of sale, determining a suitable price, engaging potential buyers, drafting a sales contract, and finalising the transaction are key elements to understand when selling your business.
Navigating the potential challenges of selling your business can be daunting. This is why we’ve simplified the process into seven steps tailored for selling your business in Australia. These steps aim to facilitate a smooth and successful sale.
STEP 1: Determine the Value of your Business
The initial step in selling a business involves understanding and defining a suitable price range, which indeed presents a challenging task. Seeking guidance from financial professionals—, accountants, valuers, and financial advisors—is strongly recommended when determining the business’s worth and planning its sale.
Valuation encompasses evaluating the business’s assets, generated turnover, and potentially benchmarking against recently sold similar businesses to estimate its value.
It is crucial to strike a balance in pricing; setting it too high may deter potential buyers while pricing it too low can limit negotiation flexibility once discussions commence.
STEP 2: Ensure Accuracy and Timeliness of Financial Records
Before selling your business, it is essential to have well-organized and up-to-date financial records available for inspection. Often, potential buyers may request financial statements covering the preceding three years to validate profitability. Any delay in furnishing these statements could significantly diminish a potential buyer’s interest.
STEP 3: Assess Tax Ramifications
Consulting your accountant is crucial to understanding the tax implications linked with selling your business. Various sales approaches carry potential tax burdens that might significantly impact the final sale price. Being informed about these implications beforehand can influence your decision regarding the selling price.
STEP 4: Market the Business
Unless the buyer is a business partner, family member, or existing employee, advertising the sale is essential to attract potential buyers. Hiring a business broker can help broaden the reach to a larger audience.
STEP 5: Define Sale Terms
Discuss, negotiate, and come to an agreement with the potential buyer on crucial aspects of the sale such as selling the entire business entity, including its name and assets. Specify any assets or the trading name you wish to retain within the terms of the sale.
STEP 6: Execute a Sales Contract
Once all parties are content with the agreed terms, formalise the agreement by having a Contract of Sale prepared to legalise the sale terms. Such a Contract should be drafted by a lawyer. The contract will outline the assets being sold and the agreements the buyer will assume (such as leases, franchises, or purchase agreements) along with all other terms of the transaction that the parties have agreed upon.
STEP 7: Finalise Settlement
Settlement day marks the irreversible point in the process. On this day, the purchaser completes the final payment, and ownership of the business is transferred.
What Can Hunter Legal & Conveyancing Assist With?
- Preparation of the Contract of Sale of Business
- Structuring Options
- Sale or lease of the business premises
- Transfers of Business Name
- Reasonable restraints on trade
Selling a business that you’ve dedicated years to building can be emotionally and financially challenging. If you find yourself feeling overwhelmed by the preparations required for selling your business, seeking guidance from a team of seasoned and knowledgeable business lawyers might be the best approach, please contact us to speak with one of our legal team on 1300 224 828 and let us make it easy for you.
Frequently Asked Questions
Do I require a lawyer to sell my business?
If your business holds considerable value to you, it’s essential to ensure that the sale yields its full worth and does not lead to unexpected liabilities.
Our role involves facilitating this outcome while ensuring compliance with all legal responsibilities.
Can I rely solely on my accountant to handle the business sale?
In essence, accountants aren’t authorised to offer guidance, draft documents, or oversee the sale of a business. Only qualified lawyers can handle the contractual and legal aspects of clients intending to sell a business.
Is it advisable to involve an accountant in selling my business?
We strongly advise engaging your accountant in the sale process. We are able to collaborate with your accountant to pinpoint specific business-related issues, especially concerning tax, GST, and accounting matters.
What documentation is necessary for drafting the Contract of Sale for the Business?
The requisites hinge on your business’s size and complexity.
To prepare the Contract you will need to supply general details, such as the business owner’s identity, business name, assets, specialised licenses or franchises, etc. A more detailed checklist can be provided during our initial discussion.
