Private Real Estate


Selling A Business in Victoria
Selling Residential \| Selling Business \| Buying Residential \| Buying Business \| Leasing Residential \| Leasing Commercial
Selling a business more than any other type of conveyance can be complicated and confusing. This is because a business may refer to a combination of many different things, each of which needs to be isolated and sold simultaneously.
This guide can subsequently, at best only be a basic checklist for those seeking to sell their business, and the potential vendor (seller of the business) must seek professional advice if they wish to conclude the sale properly.
It is estimated that the average life cycle for owning a business is between 7 to 14 years, and many people have thoughts of moving on by then. Remember selling a business is a major decision so should only be done after careful consideration.
The following steps are written for a business owner who has already decided to sell their business and is seeking to sell their business as soon as possible. In reading this guide keep in mind that there are two basic stages in selling a business. The first is preparing it for sale, and the second is negotiating its sale with a prospective purchaser:
1.	It is vital that you decide what it is you are actually selling, by isolating the various elements of a business and why they are attractive to a potential purchaser. The following is a list of various elements of your business and things you need to consider and value if you are selling your business:
	(a)	the business name;
	(b)	if you are currently leasing - your ability to transfer a commercial lease to a new tenant;
	(c)	if you own the premises as freehold, your ability to sell the property;
	(d)	plant and equipment;
	(e)	fittings and fixtures;
	(f)	stock;
	(g)	goodwill;
	(h)	telephone number(s);
	(i)	employees;
	(j)	supply agreements - you may have an exclusive right to sell certain goods,and this may be extremely valuable;
	(k)	current orders;
	(l)	registered designs, patents, trade marks and any other intellectual property you may own in the paper;
	(m)	statutory licenses used in the business - be aware that in some instances eg crayfish trapping, some taxi licences, because they are limited, such licenses can be very valuable and in high demand.
	To sell a business you may need to provide good title to each of these elements so you are able to sell them to a buyer. To save embarrassment and a breakdown in later negotiations it is advised to have this organised before you place the business on the market.
2.	Valuing each of these components can be extremely difficult, so it is advised that you approach an accountant who should prepare the following financial records:
	(a)	your tax returns for the past 5 years;
	(b)	Profit and Loss Statements and balance sheets for the last 5 years;
	(c)	the business' cashflow statements for the last 5 years;
	(d)	Bank Statements for the past 5 years.
	By having each of these records prepared you can assess the value of a business. An accountant can also provide advice on how to value the other elements of your business eg goodwill and IP. Your accountant should try to come to a preliminary figure which you think the company is worth.
3.	It is also a good idea to produce an information booklet on your business. In particular you should outline the history of the business, a description of what you are offering to a purchaser and any other information you wish to include. Again a professional can be approached to help you prepare this document and this can be provided to prospective purchasers.
4.	After making the necessary preparations it is time to advertise the business. You have many ways of going about this. You can advertise the business in a local or trades newspaper, internet websites, spread the news through word of mouth or place a sign on the front.
	It is important when you make your decision to sell, you continue to trade as normal until the business is actually sold, as this could depreciate the value of what you are offering and deter potential purchasers.
5.	When a genuine purchaser arises, meet with them to discuss the business and show them your premises.
6.	Provide the genuine purchaser with a signed s52 Statement with your financial records (mentioned above at point 3).
7.	In order to ensure that the purchaser is serious you can require them to pay you a holding deposit of up to 10% of your asking price. This can be held on trust and released after the sale is complete.
8.	Your solicitor should then be contacted to prepare a final contract of sale.
9.	In the meantime you need to do the following tasks before the purchaser receives the contract:
	(a)	contact your landlord to ensure that they will allow you to transfer the lease;
	(b)	if you own the land and it is encumbered by a mortgage or caveat ensure that you are ready to discharge this obligation and give the purchaser a clean title;
	(c)	contact your supplier and ensure that they are aware that the business is changing hands and that they should offer the same contracts to the purchaser;
	(d)	speak to all your employees and inform them that you are planning to sell the business and that you will do your upmost to protect their jobs. It is a good idea to start training your senior employees to take on extra responsibilities, so they can give guidance and advice to the new owner;
	(e)	if you hold any licenses you will want to contact the relevant statutory authority to see if it can be transferred into the purchaser's name.
10.	You can then enter into negotiations with the purchaser.
11.	The purchaser may seek the following guarantees from you:
	(a)	they may want you to insert a clause in the contract - known as a restrictive covenant - preventing you from opening a similar business in close proximity to the business you are selling for a certain amount of time;
	(b)	the may also want you to sign a seller's warranty which may require you to guarantee within reason that the business should succeed. The breach of which may allow them to reverse the sale. However again you are not obligated to sign this and you are only liable for a business, which fails with no fault of the new owners (which is relatively rare);
	(c)	they may also like you to stay for a short period after the business is sold to teach them about managing the business and to introduce them to important clients and suppliers.
12.	After the negotiations are completed, both sides should then sign the contract conveying the business to the purchaser.
13.	This is usually a good time to value the stock currently held by the business, so the purchase price paid at settlement can be adjusted.
14.	Most businesses will then most usually require settlement within 30 days, at which all necessary documents will be handed over and you will receive the final outstanding amount. A solicitor can help with organising the settlement.
15.	Contact your solicitor and accountant to organise for the payment of any GST, Stamp Duty and Capital Gains Tax that you may be required to pay.



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