Selling Your Company In Australia: A Step By Step Guide

Selling your company is a significant milestone in any entrepreneur’s life that requires careful strategic planning ahead of time. Whether you aim to retire, pursue new ventures, or capitalise on your company’s value, understanding the nuances of the Australian market is essential. In this comprehensive guide, we’ll explore every aspect of the process, providing insights to help you achieve the best possible outcome.

How to Sell Your Company in Australia

Once you’ve made the decision to sell, here crucial steps to ensure a smooth and profitable transaction.

This guide will cover:

1. Conducting a valuation.
2. Preparing your company for sale.
3. Marketing your business to attract buyers.
4. Negotiating the deal.
5. Addressing legal and tax obligations
6. Due diligence, lease assignment & training period
7. Handover and transition.
8. Common challenges in selling a company in Australia.
9. Frequently asked questions with selling your company in Australia.

STEP 1: Conduct a Business Valuation

A professional valuation performed by a licensed business broker (ideally a member of the Australian Institute Of Business Brokers) will help you understand the true worth of your company and ensure you don’t over or under value your business. In Australia, business valuations typically consider factors like:

• Profitability: Consistent revenue and profit growth enhance your valuation.
• Market Trends: Industry-specific demand can significantly impact your company’s value.
• Assets: Tangible (e.g., equipment and stock) and intangible assets (e.g., trademarks, customer base) are evaluated.
• Risk: What are the chances a new owner will continue to make the same or more profit when they take over the business?

Common valuation methods include:

• Earnings Multiples: Using a multiplier of your annual adjusted profits (or EBITDA) to estimate value.
• Discounted Cash Flow (DCF): A forward-looking approach based on projected cash flows.
• Market Comparables: Comparing your business to similar companies sold recently.
• Industry or ‘Rule Of Thumb’ Methods: Some industries have specific and unique valuation methods only applicable to that industry.

STEP 2: Prepare Your Company For Sale

A well-prepared business will mean attracting more buyers, higher offers and avoiding problems or delays throughout the due diligence and sale process. Key preparation steps include:

• Organising Financial Records: Compile accurate and detailed financial statements, BAS statements, POS reports, and tax returns for at least the past three years.
• Creating a Business Executive Summary or Information Memorandum: These documents outline your business’s strengths, market position, and growth potential, enticing potential buyers.
• Improve online and offline ‘curb appeal’: Prospective buyers will research your business online as well as drive past it and even secret shop you. Update your website, social media pages and gather more reviews, as well as tidy and clean your shop inside and out.
• Securing Intellectual Property (IP): Protect trademarks, patents, and copyrights, as they add significant value to your business.
• Address outstanding legal issues.

 

 

STEP 3: Market Your Company To Attract Buyers

Now it’s time to find potential buyers. The goal here is to have multiple interested buyers bidding at once.

To achieve this we’d recommend not only posting on the major business sale websites, (which is what 99% of brokers and sellers do), but employing a multi strategy approach (which we do) to include:

• Social media ads: At New Chapter Business Sales we have more than 10 years extensive experience in social media advertising, which has led to 3-5x the buyer enquiries for our clients when compared to only listing their businesses on the regular websites.
• Buyer networks and email list mail-outs: Large brokerages and experienced business brokers will have large lists of buyers in the market for businesses, as well as a network of strategic and regular potential buyers who they have interacted with in the past, which can increase the chances of finding a buyer.
• Active Strategic Buyer Outreach: Some brokers have the option of going out and actively contacting potential strategic acquirers (usually competitors, suppliers or clients) who may want to expand by purchasing a business.
• Posting on private high traffic websites: Large brokerages like Benchmark Business Sales (which we are affiliated with) can post their clients businesses on their sites and get their listings seen by tens of thousands of extra buyer eyeballs each month.

 

STEP 4. Negotiate The Deal

Once you’ve found a suitable and qualified buyer who has the capacity to purchase your business and they have put in an offer, now it’s time to negotiate the price and terms of the deal.

Some business sale negotiating tips include:

• Start by building rapport and understanding the other parties motivations, needs, concerns and goals.
• Ask open ended questions and actively listen.
• Use comparable sales and market data to show why your business is worth what you’re looking for. AIBB registered business brokers will have access to this data.
• Look past focusing only on price. Negotiate with asset inclusions, unpaid or paid transition and training period, etc.
• Be flexible by considering alternative payment structures, such as earn-outs or seller financing.
• Consider engaging a professional business broker to take the emotion out of the negotiations to minimise chances of a deal going sour.

 

STEP 5. Address Legal and Tax Obligations

Australian laws require compliance with legal and tax regulations during the sale process.

• Drafting a Sale Agreement: This document outlines the terms of the sale, including purchase price, assets included, and transition arrangements.
• Understanding Tax Implications: Seek advice on reducing tax liabilities, such as through CGT concessions or rollover relief for reinvestment.
• Ensuring Regulatory Compliance: Depending on your industry, ensure your business complies with all Australian laws and standards.

 

STEP 6: Due Diligence, Lease Assignment & Training Period

Once contract has been signed there will typically be a 14 day due diligence period, 30 day finance clause, lease reassignment and then a pre settlement training period where the new owner learns part of how to operate the business.

Timeframes for pre settlement training can vary depending on the complexity of the business, and sellers usually don’t want to share any of their IP or processes until a deal is closed.

 

STEP 7: Handover and Transition

Once the deal is closed, transitioning ownership and post sale training ensures continuity and minimises disruptions.

• Employee Communication: Keep staff informed about the sale and reassure them about their roles.
• Handover Period: Offer training and support to the new owner to facilitate a smooth transition.
• Customer and Supplier Relationships: Work with the buyer to maintain key relationships during the change in ownership.
• Online Assets Including Software: Websites, email addresses, domains, software all need to be handed over to the new owner.
• Utilities: Phone lines, power and water bills etc need to be changed over.

 

Challenges In Selling A Company In Australia

Selling a business is not without challenges, but understanding them before they pop up can help you navigate the process.

Common Challenges

1. Emotional Attachments: Many business owners struggle to separate personal feelings from business decisions.
2. Low Offers: Buyers may undervalue your business, requiring strong negotiation skills or waiting for better opportunities.
3. Confidentiality Risks: Revealing sensitive information to potential buyers can jeopardise operations or staff morale.

How to Overcome These Challenges

• Hire experienced advisors including a licensed business brokerage (that’s us) to maintain objectivity and professionalism.
• Use Confidentiality Agreements to protect sensitive information during negotiations.
• Prepare thoroughly to justify your asking price with solid data.\

 

FAQs:

1. How much does it cost to sell a company in Australia?

There are different costs at different stages of selling a company.

• Starting off it could be between $1,000 and $10,000 to get a professional valuation.
• At the preparation and marketing phase it could cost between $2,000 and $10,000 to get a professionally prepared Information Memorandum and then advertising your company utilising various methods.
• If using the services of a professional broker their sale success commissions can vary between 5% and 10% in most cases.
• Solicitors fees can range from $3,000 to $10,000 or more depending on the complexity of the deal.

 

2. How long does it take to sell a company?

The process usually takes 6–12 months, depending on your business’s size, industry, and market conditions.

 

3. Do I need a business broker to sell my company?

While not mandatory, brokers can streamline the process, save sellers time and stress as well as maximise final sale price by finding more buyers, negotiating deals, utilising their experience to minimise mistakes as well as managing paperwork.

 

4. How can I protect confidentiality during the sale?

When selling your company always use Confidentiality Agreements with potential buyers and only disclose sensitive information during serious negotiations.

5. Do have to pay GST on a business sale?

If your company is sold as a ‘going concern’, which essentially means the business is running as per normal, then your business will be exempt from paying GST. If your business ceases to operate and assets get sold off, then you will be liable to pay GST.

6. What happens to my employees after the sale?

It depends on the buyer’s plans. Many buyers retain employees to ensure continuity, but roles may change.

 

Conclusion: Make Your Exit Count

Selling your company in Australia is both a strategic and emotional decision. By preparing thoroughly, working with the right experts such as experienced accountants, solicitors and brokers, as well as understanding the market, you can maximise the value of your business and secure a successful outcome.

If you’d like to discuss what your company could be worth in todays market, reach out to us on 1300 405 597, or email myself, Kurt, the director of New Chapter Business Sales at kurt@newchapterbusinesssales.com.au with any questions.

And you can also learn more about us HERE