When it comes to selling a business, vendors have a limited understanding of the process and often make fundamental mistakes that can seriously undermine the final sale price. Some owners have a figure in mind of what their business is worth; this figure tends to be inflated due to emotional attachment. On the other hand, many owners undervalue their business because they do not understand the technicalities of the various valuation methodologies and which of these is the most appropriate for their specific business type.

Sydney Brokerage agents assist you to establish what the true market value of your business is.

The sale process

A potential purchaser will look closely at the Information Memorandum and will consult with their financial and legal advisors to evaluate whether the business suits their purpose. If so, they will seek further, more detailed information. The level of information provided is determined by the business owner with advice from a Sydney Brokerage agent. The purchaser will eventually want to view the business and meet with the new owner. This will be arranged at a suitable time so as not to interfere with the operation of the business; adhering to strict confidentiality. Provided the buyer has been supplied with all the basic information they require, your Sydney Brokerage agent will work with the buyer and their professional advisors in preparing a Sale and Purchase Agreement detailing the price, terms and conditions of the offer.

The agreement will nearly always include a due diligence clause, giving the purchaser a specified period of time to investigate and confirm that the information supplied to them is accurate. They will also wish to review any other information that may have been previously withheld due to commercial sensitivity. Your broker will liaise between you and the purchaser to facilitate agreement between both parties. Normally, a deposit of 5% will be paid by the purchaser on submitting an offer and a following 5% upon signing of the agreement; this is lodged in the Sydney Brokerage Trust Account until settlement.

Key factors in successful business sales

Price it right: If you price your business too high, serious buyers won’t even consider it. Price it too low and you are throwing away hard earned money.

Present it right: You will get a better price if your business looks professional and organized and is clean and tidy in all respects including signage, interior, fittings, office, and storage areas. Your plant and equipment should be in good operational order.

Prepare for the sale: Buyers (and their accountants) will want to see up-to-date figures – financial accounts, daybooks, banking and GST returns. Lease agreements should be available for inspection and ideally have a reasonable term to run. Being ready with this information keeps the sale moving along smoothly.

Allow time to sell: On average, businesses take three to four months to sell. If you have to sell in a hurry you are in a weaker negotiating position and likely to be disadvantaged.

Write down your systems: Show the prospective buyer how easy it will be to take over. List your suppliers and major customers, the jobs to be done, the hours of operation, service providers and what records must be kept.

Be totally honest: Don’t try to hide or disguise anything. Any irregularities or problems with a business will almost certainly be discovered by a buyer and their advisors during the diligence process.