Selling a Business

Perhaps it’s time for new challenges. Perhaps your business is just not doing so well or maybe retirement is on the cards.

Whatever the reasons for closing your business, there are a number of implications to yourself as the owner, to your employees and to other third parties when closing a business.

What’s it worth?
When selling a business as a going concern, naturally you want to obtain the best price. To do this, you (with your accountant) must first gather all the latest information you can on your business which a potential buyer will want to know. This may include:

• profit and loss statements
• tax returns for last seven years (if applicable)
• projected cash flow information
• value of assets, including plant/equipment
• any service or maintenance agreements
• value of debts
• leases, sub leases and other material contracts
• employee service agreements
• business registration, plus any special licenses or permits
• any other relevant taxation, financial or business information

The value of your business is only what the market is willing to pay for it, but factors including the state of the economy, the ongoing strength of your product/service, your competitors, the underlying strength of the market and opportunities for continued growth will also play a part in determining the market value of your business.

Finding a buyer
Many people choose to sell their business through a business broker.

A broker can objectively price your business – taking a myriad of factors into account – they can also separate the serious buyers from the time wasters. They should also be aware of any taxation implications of selling, handle the contractual requirements and assist with negotiation and sale completion. The drawback? Naturally, there will be a cost for the service – which may be a flat fee, or a percentage of the final sale.

Other considerations
Be sure to check current government regulations concerning company and business name deregistration, employee payments, taxation and any other requirements which must be met when selling a business, or often similarly, when closing a business.

Also, remember that for many businesses, ‘restraint of trade’ clauses may be included in the sale contract. These may impose restrictions on the seller to trade in the same vicinity, or even in dealing in the same product/service area for a period of time.

As you can see, there is a lot involved in selling a business, of which we have only presented a broad summary. It can be a very exciting time – one where all your hard work is realised. Selling your business involves careful planning, so make sure you explore all your options and weigh up the possibilities they offer.

Important information about advice
As this advice has been prepared without considering your objectives, financial situation or needs, you should, before acting on the advice, consider its appropriateness to your circumstances. View our Financial Services Guide (PDF 56kb).