Selling Up? Here's the legal Low-Down To Protect You and Your Business
There is a lot of talk about how to set up a new business; protecting yourself and your business; grow and scale. And yes, that is important (obviously!). But selling your business is also a reality that many business owners face.
There are a whole host of reasons why you might decide to sell your business (and no, they don't all relate to a forced sale!). Perhaps it's time for a change of direction; lifestyle reasons; or maybe you've built an empire and you're ready to cash in. Whatever the reason, getting your ducks in a row when deciding to sell can mean the difference between achieving the best possible price, or not.
Once you have decided that selling your business is the right thing to do, there are some important steps you need to take before going to marketing, or putting the word out that you are selling. It’s important to get this right so you are protected, and so you can maximise your return.
The biggest takeaway I have for you is to plan. Plan, plan, plan. Honestly, long-term planning can be the key to the successful sale of your business. It's not uncommon for a business to take a couple of years to sell. Don't rush this process.
Financials
The first thing to do once you have decided to sell is to talk to your accountant. You need to make sure all of your financials are up to date because naturally, this is something that prospective buyers are going to want to see. It's common for them to want to see three years' worth of financials.
Contracts
Speak to your business lawyer to make sure that all of your contracts and agreements are up to date and current.
Think about things like the lease of your business premises (if you have one) and what the process is for assigning the lease to a purchaser. This needs to be in order because it adds real value to your business.
You need to make sure that your employment contracts are in place for your team; supplier agreements should be reviewed; any arrangements you have with contractors need to be recorded properly in contractor agreements. Don't leave these things until the last minute because having to deal with loose ends can take your eye off the ball later, and that's not going to be helpful.
If your business needs compliance procedures and operating policies in place, you will need to make sure these are up to date.
What are you selling?
The next step is to decide what is for sale. Consider what the goodwill of the business is going to be (the reputation of the business). This can be tricky to attribute a value to and your accountant is going to be important here!
Identify what plant and equipment you own and what is leased. What will be included in the sale?
What intellectual property does the business have? What is the value of this? (Again - talk to your accountant).
Once you have reached this point you can start thinking about what your business is worth. Your accountant will be important (again!) here. Then you get to the fun part which is to start negotiating with potential buyers. At this point, you think about if you are going to fly solo or retain an agent, again long-term planning is key.
Employees
I often see business owners overlook talking to their employees early on. My view is you should ask your employees what their position is about staying on with the business. Do they want to stay, or are they ready to move on? If your employees are important to the running of the business then knowing where they stand can be vital for your negotiations with potential buyers.
Sale Contract
Once you are clear on all of the above, and once you have negotiated terms (and price!) your business lawyer can prepare your sale contract. The rest is procedural and your business lawyer can take it from here.
You have worked hard to build your business, and you deserve to achieve the best sale price possible when it’s time to sell. Take the time to plan - you won’t regret it.
Would you like some guidance in this area? Book a chat with us today here.
If you found this article helpful, you might like to read more in our resource Legal Advice for Small Business: The Ultimate Guide.