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The Process of Selling a Business in Australia

14th February 2022

The process of selling a business in Australia is relatively straightforward. However, it’s still worth setting some time aside before you begin, to understand the entirety of the process. This will ensure that you sell to the right buyer, for a great price, without any nasty surprises along the way.

Whatever your business, preparing to sell, setting a price, pursuing buyers, preparing a contract for sale, and settling the deal are all aspects of the sale you should be familiar with.

Navigating the pitfalls of selling your business can be overwhelming – there’s no doubt about it. At wilson/ryan/grose, we’ve dealt with our fair share of business sales. We’ve broken it down to 7 simplified steps for selling your business in Australia, to ensure a smooth sailing, successful sale.

The Seven Step Process of Selling a Business

1. Determine the Value of Your Business

The steps to selling a business start with understanding and setting a price range. There’s no doubt that determining the value of your business is going to be a challenge. It’s always advisable to seek advice either from your lawyer as well as your accountant or financial advisor when considering how to sell a business and consequently, how much that business is worth. 

The process of valuation will involve assessing the value of the business’ assets and any turnover generated. It may also be insightful to compare your business with like businesses that have recently sold for a rough gauge of value.

Setting the price too high will put off potential buyers, and setting it too low will make it hard for you to negotiate the price upward once you’ve entered into negotiations.  

2. Make Sure Your Financial Information is Accurate and Updated

When it comes time to sell your business, you need to make sure that your books are in order and ready to be inspected. In some instances, you might be required to provide financial statements to a prospective buyer for the previous 3 years of trading to prove profitability. If there’s any delay in providing financial statements, you will very likely lose the interest of a potential buyer.

3. Investigate the Tax Implications

Your accountant will be ready to advise you on the matter of tax implications associated with the sale of your business. There are different ways to sell a business, and in all  scenarios, there's the potential for tax to eat up a large chunk of the sale price, so it’s worth being forewarned as this could influence the price you are willing to sell for.

4. Put the Business on the Market

Unless you’re selling the business to a business partner, family member or existing  employee, you’ll need to advertise the sale to attract prospective buyers. You can engage a business broker to act as your agent to reach a larger audience.

5. Agree on the Terms of Sale

Things that will need to be discussed and agreed on with the potential buyer are whether you’re willing to sell the business entity, including the name as well as all the assets. If you want to keep any of the assets or the trading name, you’ll have to specify this in the terms of sale. Your lawyer will be able to act for you when negotiating the terms of sale.

6. Sign a Contract of Sale

So, you’ve agreed on the terms, both you (the vendor) and the buyer are happy, and it’s time to formalize the agreement by signing a contract of sale. The contract should be drawn up by a lawyer and will list the assets being sold and the contracts the buyer is taking over (including any leases, franchises, and purchase agreements). At this time, a settlement date will be set, usually anywhere between 30 to 90 days from the day both parties sign the contract.

7. Complete Settlement

The date of settlement is the point of no return. This is the day that final payment is due from the purchaser, and they will receive (either literally or metaphorically) the keys to the front door.

Need Help with the Process of Selling a Business? 

Selling a business that you’ve spent years growing can be challenging both emotionally and financially. If you’re overwhelmed by the thought of, “how do I prepare to sell my business?”, it might be best to get in contact with a team of experienced, knowledgeable business lawyers.

wilson/ryan/grose have over 125 years of experience in business law and we’re here to help make the transition as smooth as possible. With offices in Townsville and Maroochydore, we’re perfectly positioned to serve the Northern Region and Sunshine Coast of Queensland. Get in contact with our Business Law or Mergers & Acquisitions team today to gain assistance with drawing up contracts, completing sales transactions, and finalising all other matters relating to settlement of your business. You may get in touch with our team on 1800 974 529 or fill out the contact form on the website for us to get back to you as soon as possible.

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