This is Chapter 2 of Your Complete Guide to Selling Your Business. Check out our Introduction to the Guide go back to the beginning.
Preparing Your Business for Sale
We are all familiar with the expression, ‘by failing to prepare, you are preparing to fail’. Begin your sale journey by collecting information about your business. The information that you collect will give both you and the buyer a clearer understanding of your business and will also help you to identify your business’ strengths and weaknesses.
If your business owns a well-known brand and all of its equipment outright, has a team with a low churn rate and exclusive contracts with reputable suppliers or customers, these are strengths to highlight. On the other hand, a weakness could be that it has experienced a downturn in profits in the past few months or there are issues with intellectual property ownership rights.
By reviewing your business’ strengths and weaknesses, you may also decide that it is worthwhile to delay the sale until you can address your business’ weaknesses. Otherwise, it may suggest you need to temper your sale price expectations. Having all the information on hand will also speed up the sale process, and allow the buyer to undertake their due diligence quickly.
What Documents Do I Need to Prepare?
- Financial Information: Balance sheets, profit and loss statements, cash flow statements and point of sale reports.
- Business Name Registration: Copy of your certificate of business name registration. You’ll also need access to your ASIC Connect account for transferring your business name at settlement.
- Asset Lists: A list of the business’ physical assets including copies of the original receipts for equipment and any contracts for the equipment you have leased.
- Intellectual Property Lists: You should also prepare a list of your intellectual property such as trade marks, websites and social media accounts.
- Lease: The registered version of your lease, including copies of your current
invoices for rent and outgoings and insurance policies.
- Licence and Permits: Federal, state and local licenses and permits that are required to run your business. For example, liquor licences, food and waste permits, and footpath licences.
- Employees List: Details of each employee’s name, position, start date, pay and entitlements.
- Supplier and Customer Agreements: Copies of any agreements entered into with third parties. If any agreements are verbal, such as supply agreements, prepare written agreements to protect your business.
- Business History and Market Data: When your business commenced, a business plan and information on your industry.
Now that you’re aware of the steps you’ll need to take in preparation for selling your business, read on to find out how to value your business before you find a buyer.
This chapter was an extract from LegalVision’s Sell Your Business Manual. Download the free 36-page manual featuring the sale process, preparation checklists, and your cheatsheet for negotiating terms.
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