Small mistakes when selling your business could end up costing thousands of dollars and impact the final sale amount.
As a business owner, be aware of the time and resources involved in preparing your business for sale, to help achieve the best possible outcome.
It’s worthwhile thinking like a buyer throughout the sales process, remembering potential buyers will undertake a thorough due diligence on the business, including:
Financial records for the past three financial years should be provided to potential buyers to show how the business has performed. Business owners should advise their accountant of plans to sell a business as soon as possible, as it involves complex procedures which can take weeks or months to complete.
- Vendor Statement (Form 2)
Small businesses with a sale price of up to $300,000 will be obliged to provide a prospective buyer with a Vendor Statement referred to as Form 2. This must be endorsed by a qualified accountant.
- Depreciation schedules/Plant & Equipment lists up to date?
If you use your assets to help calculate value, remember to take depreciation into account and keep track of the loss of value for your assets over time. This information should be included in an up-to-date plant and equipment list.
- Existing contracts
Are your employment contracts up to date? Buyers may want to know they have a readily available workforce for their new business. Do you have proof of purchase contracts and forward orders, so the business’ revenue can be projected? Are your supply costs guaranteed? Contracts with suppliers provide proof of the business’ cashflow and operating costs.
- Policies and procedures
The success of many businesses can be attributed to their tried and tested policies and procedures. Most buyers will want to see proof of these before purchasing.
- Intellectual property (IP)
Selling a business includes not only fixed assets but the business’ IP. It’s vital that your IP, such as software or product designs, is protected and secure for buyers.
- Presentation and buyer appeal
Are the premises well-presented and representative of a quality business?
For support with selling, buying, appraising and valuations of business, contact Kent Aughey at firstname.lastname@example.org or (08) 8334 0600.