Sell your business FAQ guide by SOT Business Brokers Perth

Want to sell your business? The team at SOT Business Brokers Perth have put together a handy FAQ guide that is a must read for anyone looking to sell a business. Please contact us with any additional questions you may have.

 I want to sell my business fast. How long will it take?

How fast a business sells depends on a number of factors including the industry, complexity, sale structure, and other factors including the size of business, sale price and more. You should allow at least 6 months for the whole process to sell a business. A good business broker will keep ads refreshed and offer additional marketing strategies to get wider reach if needed.

When is the best time to sell a business?

From a financial perspective, a business with stable and growing financials are understandably more desirable from a buyer’s point of view than a business in decline. But there are many personal factors which can influence an owner’s decision to sell. Read more about the best time to sell a business here.

Which business valuation methods do you use?

Valuing a business is a critical part of the sales process and to do it accurately and consistently requires experience, industry knowledge and the ability to analyse and closely examine all the factors involved.

Value can be determined by many factors including growth potential, cash flow, potential economies of scale, sector trends and activity, sustainable profit, asset value, financial history, location, competition, customer base, ongoing management, desirability and the economy.

The main business valuation methods include:

Multiple of earnings - mainly used for businesses with a record of sustainable profits.

Discounted cashflow - mainly used for large cash-producing businesses.

Asset value - used for businesses with a large tangible asset base such as property or plant.

Entry cost method - comparing the entry cost alongside the value of the business.

Industry precedent - some industries have their own unique valuation methods based on sector criteria.

Consider it from a buyer’s perspective where you can read more on the topic of how to value a business to sell here.

What documents do you need to sell my business?

• Profit & Loss financials from your accountant for the last 3 years
• Current year interim Profit & Loss statement
• All Debtors and Creditors in order and up to date
• Inventory up to date - can old stock be sold or excluded?
• Asset register with current plant/equipment list and depreciation schedule
• Copy of current employees contracts
• Copy of current supplier/client contracts
• Copy of Government/Industry Licences
• Copy of lease agreement
• Copy of Franchise or License agreements (if applicable)

Who will see these sensitive documents about my business?

All potential buyers are vetted for seriousness and are required to sign a NDA (non-disclosure agreement) to maintain the confidentiality of the sale. Once signed, the potential buyer will see a high level business summary (prepared by SOT Business Brokers) and are invited into our office to discuss the financials in more detail. Once an expression of interest (EOI) has been made, the buyer will begin due diligence to satisfy any questions they have.

Should I tell my employees that I want to sell my business?

As a general rule, no. Key employees may need to be in the loop, however too much advance notice comes with risk. It can trigger staff to leave if they feel their future is uncertain, your competitors may find out and your customers may start looking elsewhere. All these things can jeopardise a sale so you may be jumping the gun before a buyer is interested. Read more about this topic here.

What tax will I have to pay on selling my business?

The tax implications of selling a business will depend on your personal circumstances. Some form of tax is inevitable, and it is vital you get advice as early as possible. Ideally you should get this advice at the outset, as it can have an impact on how best to structure a deal/sale. Get professional advice!

Why use a business broker to sell your business?

A good business broker will simplify and destress the process of selling your company, enabling you to continue business operations without disruption. Discretion/confidentiality are key and allow you to run your business while getting you the best sale price. Business brokers are experienced in valuation, negotiation, mediation and transacting.

How will I know what is going on?

At SOT, we give regular updates to keep you informed at every stage of the sales process. No details about your business are ever given out without your express permission. You control who we talk to and what we tell them. We are accountable to you at every step of the way.

How do you find me a buyer?

Where to advertise your business for sale and how the sale is packaged and presented for high exposure is a critical part of the journey of selling a business. We work with top ranked websites selling businesses, ensuring your business is marketed to a large network of buyers. We have developed market leading, cutting-edge marketing initiatives which deliver results and have an active database of buyers and investors who are on the hunt for great business opportunities.

What are your business broker fees?

Our business broker fees are based on a win-win success model. We get paid when you do and the fee varies with the price of the business. Our success based fee ensures we have the incentive to get you the best possible price and unlike many business brokers, we don't make money on excessive up-front fees. We do charge some basic marketing costs and our fee structure is transparent and fully inclusive. We have solutions for all business sizes and we will agree our fees with you in writing at the outset so we can both concentrate on selling the business.

Is there a contract I need to enter into to sell my business?

Listing agreements with SOT are for 6 months and some businesses will benefit from extending the contract after this initial period. SOT are members of the Australian Institute of Business Brokers and a signed listing agreement is the first step in authorising us to act on behalf of your business.

What is vendor finance?

Vendor finance is when the seller of a business funds part of the business sale instead of the buyer going down the route of traditional lending. Typically the buyer will pay part of the price upfront and the finance terms are arranged via contract privately rather than through the banks. The buyer pays off the purchase price of the business (including interest) via instalments to the seller (vendor). Vendor finance is used more often than you might think to achieve a better deal for both parties. Buyers see it as a way to reduce risk and it enables them to buy a business they might not otherwise have been able to finance. Sellers use it to access a wider pool of buyers and to achieve a faster sale at a higher price than they may have been otherwise offered. Read more about vendor finance here.

Got any questions? Contact SOT Business Brokers Perth today.