The small business specialists
Phone: 13 12 49
Selling a business will require planning to make sure you receive the best possible price.
You will need to understand your obligations before selling or closing your business.
Generally, selling a business involves the following steps:
Before deciding to sell check whether you:
Ideally, you will begin preparing for sale well before you put your business on the market.
This could include:
Potential buyers will want to undertake their own due diligence into your business. However, it is a good idea to prepare a buyer’s information pack outlining key information about the business and what is included in the sale.
As a general guide the pack should include:
Determining the value of your business can be very difficult. You may want to obtain advice from your financial adviser, accountant or a registered business broker with experience in selling similar businesses.
TIP: Only a business broker licensed under the Real Estate and Business Agents Act 1978 is permitted to act as an agent for a business owner in the sale of their business in Western Australia.Generally businesses are valued using one of the following methods.
This is the most common method for valuing a business. The following formula is used to calculate the selling price:
Sale price = (net annual profit x 100) ÷ ROI percentage
TIP: To find the ROI percentage for your industry talk to your accountant or contact us
This method adds all the assets of the business together to determine its value. Assets may include stock, plant and equipment, property, vehicles, furniture, intellectual property, established client list and goodwill. The following formula is used to determine the asset value:
Sale price = assets of the business + goodwill
TIP: Valuing goodwill can be difficult, seek advice from your financial adviser or accountant.
This is most commonly used to value professional practices such as legal, veterinarian or insurance brokers. It is rarely used to value retail businesses.
The following formula is used to determine the market value:
Sale price = turnover x industry multiple
TIP: Make sure you have a good understanding of the current market and are aware of industry standards. Research the market for businesses similar to yours, compare prices and set a price that is competitive.
Selling your own business requires specific skills and resources; a licensed business broker or commercial real estate agent can assist you.
If you decide to sell your own business, here a few matters to consider:
Use your immediate networks of competitors, clients, employees, friends and family to promote the sale of your business; you never know who could be interested.
Your accountant may have clients looking to buy an established business.
Advertise the sale of your business using:
TIP: Use general terms to advertise your business and don’t disclose the business name.
When selling a business it is common to receive applications from non genuine buyers. They could be competitors, suppliers, employees or clients trying to find out who is selling. Before giving your business information pack to potential buyers make sure they sign a confidentiality agreement first.
Once a potential buyer has conducted due diligence, they may want to discuss terms before making a formal written offer. Prepare yourself for negotiation by considering:
It is a good idea to involve a professional business broker, settlement agent or lawyer in the sale of your business. This will prevent problems and make sure the sale is valid.
A contract for sale of a business as a going concern should include all the details, and terms and conditions, negotiated and agreed with the buyer.