Selling your business is exciting, but it is also a complicated process. For medium businesses, there may be more issues to consider than a small business. We set out the key points you should be aware of below.
Selling Your Business
In general, many SMEs choose to sell their business using the Standard Sale of Business Contract 2015. This contract contains the standard clauses usually included in a sale of the business contract. Note that other documents may also need to be attached to the contract depending on the type of deal. For example, the sale of a franchise must include the franchise agreement.
Businesses are also able to add or modify the clauses in the Standard contract with the addition of special conditions, which will take priority over the standard terms in case of inconsistency. For example, as a medium business that may have multiple departments, software programs and procedures, your purchaser may wish to have some specific skills to be included in the training period; this can be set out in a special condition.
Determine exactly what is being sold
The sale of the business agreement must specify what assets the purchaser is buying in exchange for the consideration. Assets of a business may include:
- Business name;
- Equipment or plant used by the business;
- Contact details (including phone numbers, emails and social media accounts);
- Intellectual property;
- Customer lists.
You must ensure that the purchaser understands precisely what they will be getting in the sale.
The purchase price is one of the first items to be discussed and agreed on before the sale of the business contract is drawn up. The sale of a medium business will take into account the business’ goodwill and the plant and equipment. Hence, a medium business with more customers and a good reputation will sell at a higher price than a small business.
Once the purchase price is determined, it should also be allocated. This process decides how much should be given to plant and equipment, and goodwill.
As a medium business, you will likely have at least 50 employees. Before selling your business, you must inform all employees of the sale and ascertain which employees desire to stay on with the business. The Standard Contract includes a schedule for employees that allows you to set out details of each remaining employees’ employment agreement and any benefits or long service leave they are entitled to that would carry on to the new employer.
It is up to the purchaser which employees they choose to retain and whether or not they will recognise the service of transferring employees. As the seller, you are responsible for terminating the employment agreements of those who will not be transferred and to pay employee entitlements set out in the Standard contract.
Medium businesses should ensure they have considered the value of their business before selling it, reflected in an appropriate purchase price. The agreement should be clear on what is being sold and include any specific details as special conditions. If you are unsure or need assistance in getting the legalities sorted, contact LegalVision today to speak to one of our experienced business lawyers.