VIDEO: Business Insights - Selling a Business

The Business Insights series by Maclarens Lawyers looks at the issues you need to consider when selling a business.

Selling your business?  Here’s why you should speak to a lawyer early in the process!

The decision to sell a business is a big one. 

After all, regardless of the size and scope of your business you have generally invested a lot of time, money and effort into making it successful. 

When it comes time to sell, you will also want to maximise the return and ensure the transaction runs as smoothly as possible.

The process of Selling a Business actually comprises of two stages:

·        Preparing your business for the sale

And

·        Negotiating the deal

Unfortunately, many business owners focus almost entirely on the latter without realising that if they called in their lawyer earlier in the process – and focussed more on the preparation – it would probably be considerably easier.  

Better yet, having expert assistance and advice from your lawyer from the very start of your business ownership would be amazing…… but let’s leave that for another video!

Preparing your Business for Sale

STEP 1

The first step in preparing your business for sale is to make sure that you have COMPLETE and ACCURATE records.

Keeping complete and proper records of your business activities will make your business more transparent, and this in turn can impact your potential sale price.

Make sure that all of your financial records are up-to-date and comprehensive. 

Work with your accountant or auditor to make certain everything is accounted for and that all of your figures can be explained.    It is always best if this is done on an ongoing basis as part of your regular operations, but at the very least, you will need to check these things when you begin to prepare your business for sale so that you have time to address any “gaps” in the information.

STEP 2

The next step is to look at all of your legal documentation. 

Make sure you have all of your contracts, agreements, policies and procedures up -to-date and that everything is both complete and accessible.  Remember, potential purchasers will be conducting due diligence – they will want to know that everything is in order.

Working with your lawyer early in the process is critical.  You will need to review your employment contracts, leases, hire-purchase agreements, client and supplier contracts, terms of sale, manufacturing and supply agreements, intellectual property licenses, and so on. 

A lawyer can also help you to identify any potential weaknesses in your business that can be addressed before trying to sell – putting you in a much better bargaining position.

STEP 3

Your lawyer can also help you to consider how to structure your sale. 

Selling a business can be complex and there are lots of ways to both value your business and structure the sale.  We understand the potential impacts on your warranties and risk period, as well as the different taxation consequences, and can advise you accordingly …. BEFORE  the sale contract is drawn up.

We can also talk you through your rights, obligations and risks around structuring a sale price and how to value the tangible and intangible assets of your business, including stock and goodwill. 

Not only that, we can help you to structure the timing and methods of payment, as well as considering the benefits or risks or issues like instalment payments, vendor finance or agreeing to earn out provisions.

Having a clear understanding of the process, and the various options available to you, before you enter into any negotiations will help you to make better decisions.

Negotiating the Deal

Of course, when all of the relevant information has been gathered and reviewed, and your sale price has been determined, your lawyer can also help you with negotiating the formal Deal.

The negotiation process can be stressful and having an experienced lawyer on board to advise you through the process is essential. 

At Maclarens we have guided hundreds of clients through the sale of a business and we know the potential risks and pitfalls that can arise.  Believe me, we have seen it all!

The most important thing to remember is that we are right here, by your side, negotiating on your behalf with your best interests at heart. 

As I said at the said at the start of this video, selling a business is a BIG decision. 

Don’t put the success of your sale in jeopardy by not doing enough preparation, or incorrectly valuing your business. 

Call your lawyer EARLY in the process and maximise your return, whilst minimising risk.