So, you’ve decided to put your business up for sale – here are 5 things you need to consider first.
Thinking about selling your business? Exciting times ahead! It’s a chance to cash in on all that hard work you have put into running the business. But, before you start dreaming of sandy beaches and piña coladas, there are five key things you need to consider. Trust us, a little preparation and planning goes a long way!
1. Value your business
First up, how much is your business really worth? This is super important for setting the right selling price. You’ll want to dive into some number-crunching – whether that’s through analysing the market, calculating your business’ net worth (assets minus liabilities), or evaluating your ideal return on investment. And let’s not forget getting tax advice to understand the tax implications that will arise from the sale of your business. You’ll want to know if capital gains tax (CGT) or goods & services tax (GST) might apply when you sell. The upshot? Get financial advice, stat!
2. Your Business’ Intellectual Property (IP)
Now, let’s not overlook your business’ IP! Whether it’s your business’ catchy brand name, innovative products, services, or unique methods and ideas, your IP is a key asset. Make sure to audit what IP you want to protect. For some types of IP, a formal registration is required before you can claim ownership and have the right to commercialise your creations. Also, think about whether you would pass on IP rights to the new business owner for them to inherit the business name and keep the business brand alive!
3. Confidentiality Agreement
You’ll want to have a confidentiality agreement ready (otherwise known as a Non-Disclosure Agreement or “NDA”) and provide it to your potential buyers when negotiating the sale of a business. This is crucial because you will share confidential information about your business operations to potential buyers, enabling them to make an informed decision about whether to purchase your business. The confidentiality agreement protects your sensitive information. It lets you share the inside scoop on your business with potential buyers while keeping your secrets safe. If someone spills the beans, don’t worry – there are legal remedies that you claim to make things right!
4. Restraint of Trade Clauses
Most contracts for the sale of a business will usually include restraint of trade clauses to protect the buyer and ensure the viability of the business moving forward. Restraints can limit what you can do after the sale, so it is imperative to think about what restraints you’re comfortable with. Do you plan to stick around in the same industry? If so, consider how strict will these restraint clauses be – would you be okay with a ban on starting or engaging in a competing business in the same area for a year, or is that too OTT (over the top)?
5. Contract of Sale
Last but definitely not least, as the seller, it’s usually on you to prepare the contract for the sale of the business. The contract should cover all the nitty-gritty aspects necessary for the operation of the business: assets, employees, leases of the business premises, licenses – you name it! Keep in mind, some things like the transfers of leases, permits and licenses can take up to 12 months. So, get those contracts prepared and ready early in the sale process.
There you have it—five essential things to consider before selling your business. With proper preparation and planning, you’ll be on your way to a smooth sale!
If you need help or advice with selling your business, contact us at [email protected]