The Sale Process
1. Appoint a Business Broker
Always use a respected licensed Business Broker; we are accredited by the Real Estate Institute of Queensland (REIQ) and are also members of the Australian Institute of Business Brokers. It is a legal requirement of the Property & Motor Dealers Act 2000 for any Agent to perform any service for a client only with a completed and signed Appointment to Act Agreement.
2. Selling Price of the Business
There are many factors that contribute to the selling price of a business; through provision of all the correct information your Business Broker and Accountant can determine an estimated sale price for your business. It is the market itself that will ultimately determine the sale price. Methods of valuation often used are covered in more individual detail in valuing a business!
A simple test is to ask yourself ?would I pay $xxx for that business?? If your answer is ?no? ? then how much are you prepared to pay?
Many people see other similar businesses for sale and through limited information assume that they have sold at the advertised price giving them false hopes as to the value of their business. Quite often, although in the same industry with similar turnover it does not also follow that their expenses will be the same or their profits are less.
Each business is unique with its own history, income, expenses, employment, rent and legal circumstances without a detailed analysis of all the facts, it is very difficult to compare like for like.
Establishing a correct Market Price for the business is essential.
3. Produce a Market Report
Elders Business Brokers will produce a detailed Market Report for your business that will include the following:
* Business details ? Company Name, location etc.
* An overview of the Business.
* Brief details of the Business history.
* Day to day operations.
* An overview of the Customer Base.
* An overview of Suppliers.
* Details of Plant & Equipment.
* Details of the Premises.
* The number of full, part-time and casual staff.
* Estimated value of Stock.
* Future potential.
* A summary of the Financials.
* The asking Price.
These reports are often known by other names such as an Information Memorandum, Selling Memorandum and Business Information Packs. Basically, they can be from one page to fifty pages long and are designed to give potential purchasers enough information about your business to continue to the next stage.
4. Advertising
The key to a successful sale is in the Marketing Campaign; Elders Business Brokers uses many forms of media to advertise a business. The internet has greatly improved the value of the exposure available and more people are using it everyday.
Newspapers, Magazines and Trade Journals will always have their place and an advertising budget should be set aside that is mindful of the individual?s circumstances.
The more marketing channels that are utilized, the more people know your business is for sale. However, if the campaign is too intense, over exposure can occur and people can often obtain a negative feeling towards a business. A good balanced campaign is the preferred option with prolonged exposure is often the way to attract more buyers.
5. Enquiry to Contract
Now that your Business is ready for sale and has been marketed correctly, Elders Business Brokers can help guide you through the Sales Process.
6. Enquiry & Confidentiality Agreement
Any potential purchaser will make an enquiry via the internet, phone or fax and it is our policy at Elders Business Brokers to ensure a Confidentiality Agreement is signed to help protect the privacy of the vendor.
7. Market Report
After the completed Confidentiality Agreement has been returned, the completed Market Report can be sent to the potential buyer.
8. Financial Information
Having received the Market Report, potential buyers will most likely request details financial statements.
9. Property Inspection / Owners Meeting
Any serious perspective buyer will want to view the business premises or operation. At this time they will also meet with the owner. The premises should be made as appealing as possible. A clean, tidy, well run operation has much more appeal than a cluttered, struggling mess.
First impressions count for all businesses ? Cafes, Restaurants, Bars, Butchers, Hotels, Caravan Parks, Manufacturing, Wholesalers, and Automotive Industry etc. If it is presented well, buyers stay interested. If a buyer thinks he needs to invest extra money to tidy up the operational side of the business they will more than likely try to reduce the price.
As the business owner on this first encounter, you should always remain positive about the business, focusing on the strengths and do not be afraid to mention the downsides. Many potential purchasers focus on the weaknesses of a business believing that this is where they can make it more successful. In addition, any flaws that may be in the business will usually come out during Due Diligence.
10. The Offer Process
It can sometimes seem an age before any potential purchaser gets to the stage where they will make an offer for your business. The buyer may request further information from you such as recent sales figures, latest BAS statements and have more questions about the day to day operation of the business.
At Elders Business Brokers our work is not complete until the Contract has settled. To assist in the negotiation stages for any vendor and buyer, we implement our Preliminary Sales Agreement. This document enables the business vendor and purchaser to accurately document their offer or counter offer without the need for legal contracts at the early stage of negotiations. Once both parties have outlined and agreed a proposal, we then move to a Business for Sale Contract.
11. Business for Sale Contract ? Conditions
The time a contract takes to settle can vary depending on individual circumstances. The contract may also contain conditions that need to be fulfilled in order for the business sale to be settled by the date stated in the contract.
Examples:
* Finance clause: 14 days from date of contract
* Purchaser has 14 days from signing contract to find suitable finance suitable to complete the purchase of the business.
* Due Diligence: 10 business days from date of contract
* Purchaser is to complete all aspects in relation to operational and financial investigations into the business within the allocated time frame.
Other conditions may be inserted and all time frames may vary. Once these, conditions have been satisfied the contract becomes unconditional.
There is usually a short period of time between the contract becoming unconditional and settlement. This is usually a good window of opportunity for the new business owner to become familiar with the day to day operation of the business.
After settlement there may be a period of owners? assistance which can also vary. Having now divested your business interest, it is time to take the well earned rest and allow the new business owner the opportunity to rep the rewards of their purchase.
12. Handover Documentation
At some stage in the future a perspective purchaser will require hanover documentation. If this is not required during the Due Diligence period, it will almost certainly be required on Settlement. At the very least it will limit your own vendor assistance period after the sale.
Commonly known as either the Operations Manual (OM) or the Policy & Procedures Manual; the detailed document will provide information on the following:
* Products & /or Services
* Sales / Manufacturing Process
* Suppliers
* Documentation
* Advertising
* Staff & Welfare
* Health & Safety