Sell My Business
A Step-By-Step Guide To Selling Your Business Yourself
How To Sell Your Business Privately
If you’re looking to sell your business privately without using a business broker, For Sale By Owner can assist with this and can offer a number of advertising options to list your business for sale on multiple websites. There are many advantages to selling a business yourself, from financial benefits to being able to deal with potential buyers directly.
The following is a step-by-step guide to selling a business in Australia.
There are four main factors which can have a big influence on the sale:
a. Why Is The Business Being Sold?
There are many reasons why you may be wanting to sell your business. As a general rule, it’s best to not disclose your personal reasons for selling if this may be interpreted in a negative way. For example, a forced sale because of health reasons. Buyers may feel that there is a greater urgency on your part to sell and make try to take advantage of this.
b. What Assets Does The Business Have?
Many businesses have a combination of tangible assets and intangible assets. The former is generally easier to value but is less common with many businesses. Brand awareness, goodwill and projected growth can be harder to value but can in many cases be the most significant factors contributing to the value of the business.
c. How Profitable Is The Business?
The price-earnings ratio of a business is often used as a way of determining the value of a business. The earnings after tax have a significant influence on the market value of the business for many industries.
D. How Long Has The Business Operated?
In traditional industries like hospitality, the number of years the business has been in operation is considered an integral factor in determining how solid the business is. If a business has only been operating for a short period (less than 2 years), then it generally does not have as much of a proven track record to withstand different market conditions. This, however, is just a factor which should be taken into account and not a single determining factor. There are also many businesses that have been in operation for shorter periods and where growth in their industry may outweigh proven market stability.
Step 1: Engage Professional Help
The professional services that an accountant or solicitor can provide are of critical importance when it comes to selling your business. By engaging a professional, you are more likely to be able to sell successfully, sell for the correct price, meet all your legal and tax commitments, and to achieve a better result overall.
An accountant will be able to assist you with collating and presenting your businesses’ financials, which is one of the most important aspects in the sale of your business. In addition to that, they will also be able to help you correctly value your business, help decide what will be included in the sale and advise you on various tax implications.
A solicitor will be able to assist with all legal aspects of the marketing and sale of your business. They will be able to assist with document preparation such as prodiving a letter of intent, Non disclosure agreements, and the actual contract of sale of your business. In addition to that, a solicitor will be able to advise you on your legal obligations when it comes to the sale or your business.
The other part of the sale is the advertising of your business to prospective buyers, and that is where For Sale By Owner comes in. We can provide all the services and products you need to advertise your business online and get the maximum exposure to potential buyers.
Step 2: Value The Business & Decide What’s Included
There are various ways of valuing a business and one method is often favoured over another depending on the particular industry, but a combination of methods can also be used. With many valuation models, factors which should be taken into consideration are: a. The return on investment, b. Asset value c. Costs of starting a comparable business from scratch d. Future profit projections, and current market values.
Assets are also an important factor. There are two types of assets:
a. Tangible Assets: These are physical things such as computers, equipment, tools, furniture etc.
b. Intangible Assets: This comprises things such as software, intellectual property, branding and goodwill.
The price-earnings ratio (P/E ratio) is an important factor to consider. The P/E ratio is the business’ value divided by its after-tax profits. In many instances, this ratio can be determined by the type of industry.
The value of a business can then expressed by the following formula:
Value = Earnings after tax × P/E ratio.
As an example, if your business made $100,000 annually after tax and the P/E ratio was determined to be 5, this would give a business valuation of 5 x $100,000 = $500,000.
As stated, The P/E ration can vary amongst different industries and an account can advise on this. A prospective buyer may ask for justification as to how the P/E ratio was attained.
Step 3: Prepare Your Business For Sale
Before commencing your marketing campaign, it’s a good idea to prepare your business for the upcoming sale. This can effectively be broken down in to three parts:
a. Preparing Admin Paperwork. It’s important that your business financials are up-to-date. If possible, you will want to have 3-5 years worth of financial documentation. In addition to this, you will need to ensure that your business registration, intellectual property, depreciation schedules, lease documents (if applicable), and any other documentation is up-to-date and available to prospective buyers to view.
c. Preparing Physical Assets And Stock. If your business carries physical assets or stock, it’s important that these are fully documented and that everything is accounted for. If your business is being sold with a lease, it will also be important to ensure that the premises are as clean, safe, and as well-presented as possible. If your business is being sold with physical stock, you will also need to create an inventory of all stock.
c. Management Of Staff. If your business is being sold as a going concern, with an agreement that current staff will remain working in the business under the new owner(s), you will need to review employment contracts and ensure that all entitlements to employees are documented, such as annual leave etc.
Step 4: Conduct Your Advertising Campaign
It’s now time to advertise your business for sale to as many prospective buyers as possible. For Sale By Owner will assist you in this regard, and will ensure that your business is listed on all the major websites in Australia where buyers are searching businesses for sale.
Once you have created your account, you will be able to input all the details of your business, such as the title, description, photos, price and any other information you would like to have added. This may include things as the year your business started, number of employees (if applicable) and any other things you feel are important for prospective buyers to know.
Once you have created your business listing you will be able to make the listing live from within your account. For Sale By Owner will then publish this to a range of Australian business sites, and your business listing will then appear shortly thereafter. If you need to make any changes, you can just log into your account at any time, make the required changes, and click to save your changes. These updates will then flow through to all websites within 15 minutes or so without any intervention by us being necessary.
When prospective business buyers make an enquiry, they will be able to get in touch with you quickly and easily using one of two ways: a. The buyer can just fill in the contact form on any of the sites on which your business listing appears. They will then be sent an automated email with your name and phone number, and you, in turn, will also receive an automated email with their name, email address and phone number (if they have provided these details), or b. The buyer can phone or SMS the number listed and input the phone code for your business advertisement. They will then get an automated SMS with your contact details, and you will also be alerted of this. Both parties can then easily get in touch with each other.
Step 5: Communicate, Negotiate and Sign Contract
Your business is listed for sale and it’s now time for buyers to start making enquiries. When selling your business yourself and without using a business broker, you will generally be communicating with buyers directly yourself. When a prospective buyer makes an enquiry both parties will initially receive the other party’s contact details. We would always encourage you to be proactive and to contact potential buyers anytime an enquiry is made.
For some communication you may choose to have your accountant or solicitor communicate with the buyer, depending on what stage proceedings are at. For Sale By Owner is also able to offer negotiation services should you prefer not to do this yourself. Negotiations may be reasonably straight-forward or may take some time, depending on the complexities of the business, and the requirements of the buyer.
Once the conditions of the sale have been agreed on, it will be time for all parties to sign the contract of sale. Where possible, it’s always recommended that this step is facilitated and overseen by your solicitor or legal representative.
Your business has now been successfully sold.
1. You’ll Save Money On Advertising
One of the reasons business owners would historically often use a business broker to sell their business, was to be able to have access to the main business portals. This is now no longer necessary as business owners can now sell privately through For Sale By Owner. We provide you with all the marketing tools and exposure you need to sell your business.
By selling your business privately through us, you will be able to save a significant amount on advertising fees. In addition to this, there is no commission payable when your business has sold. For Sale By Owner has sold a vast number of businesses over the last 10 years and has a proven track record when it comes to selling your business privately.
2. You’ll Have Total Control
The For Sale By Owner platform has been set up to give users maximum control over all aspects of their online advertising campaign. When you sign up with us, you’ll be given access to our Members’ area where you will initially create your business listing. You will have the ability to add a title, description, price, features of the business etc. and will be able to upload any photos or videos of your business. Most features here are not mandatory; in most cases, you will have the option of showing as little or as much information about the business for sale as you like.
In terms of making changes, you can log in and edit, change or delete any part of your online advertisement as you like. These changes do not require any manual review and will flow through to the business websites on which you will be listed within minutes.
3. You May Sell Your Business Faster
Businesses that are advertised directly by the business owners and without a broker being involved can sell faster than those who rely on third-parties for respond to enquiries. Whereas a broker may need to contact you constantly to seek information that buyers have requested and to provide answers to their questions, the business owner will generally be able to provide this information much faster.
Whilst there is no independent statistical information as to the success rate and time on the market for those selling their business in Australia themselves, the feedback from many buyers and sellers is that they much prefer the process of dealing directly with the other party and without a middle-man being part of the process.
4. You’ll Get Maximum Exposure
There are several leading business sale portals in Australia, and it’s important that your business is listed on as many of the main ones as possible. By listing your business with For Sale By Owner you’ll be able to access a wide range of these sites and market your business for sale to as many potential buyers as possible. Some of the sites on which we publish are Seek, Domain Business, For Sale By Owner, Eden Exchange and Juwai.
In addition to the sites to which we publish, we also maintain a database of buyers who are currently looking for businesses for sale. We send out weekly email campaigns to our database if the business listed matches the criteria of the prospective buyer, for example, cafes for sale in Sydney region, hairdressing salon for sale in greater Brisbane etc.
You Won't Have To Pay A Commission
When selling your business privately in Australia you’ll be able to save considerable money on advertising fees, as discussed previously. However, perhaps the most significant savings is on the actual broker commission. Business broking fees usually range from 5-10% of the purchase price of a business and so are very significant.
When selling your business online in Australia with For Sale By Owner, you will not be liable for any commission whatsoever, once your business has sold. This gives you the ability to either be a little more flexible on the selling price (potentially resulting in a much faster sale), or else will result in a vastly more profitable result once you have sold.
If you own a business in Australia and would like to sell your business privately, please get in touch to see how we can help. For Sale By Owner has all the infrastructure in place in order to get your business listed on all the main Australian business portals.
Please view our business packages for the latest inclusions and pricing.