Selling a business is a big decision, and just like when you buy a car, you want it to be in top shape before handing over the keys. Would you pay a premium for a car without a registration, service history, working ignition, or a smooth-running engine? Of course not. Likewise, potential buyers won’t want to invest in your business unless it’s well-maintained and organised.
Before listing your business for sale, take a step back and put yourself in the shoes of a buyer. What aspects of your business might they find lacking or problematic? Address these issues proactively to avoid them becoming sticking points during negotiations, where they could lead to a reduced price.
Here’s how you can avoid common pitfalls and maximise the sale value of your business:
1. Ensure Your Corporate Records Are Complete
Inadequate or disorganised corporate records can deter potential buyers. Missing documents such as constitutions, registers of members, director resolutions, and share transfers can raise concerns about your business’s overall management. This is especially critical for businesses operating through a trust structure, where record-keeping is crucial. Ensure all records are updated and accurate and consider performing an audit well in advance of listing your business for sale. This gives you the time to retrieve missing documents and address any discrepancies.
2. Get Your Employment Contracts in Order
For many businesses, the employees represent the true value, with many buyers seeking to acquire the team rather than just physical assets. However, incomplete or outdated employment contracts can be a red flag. If contracts are missing, poorly drafted, or non-compliant with the law, potential buyers might worry about inherited employment claims. Review and update contracts for key staff members, ensuring they are legally sound and include any necessary post-employment restrictions. This adds confidence for the buyer and may even increase your business's value.
3. Secure a Valid Lease
If the physical location of your business plays a role in its value, ensure that the lease is in good standing. Many business owners overlook lease renewals, especially when they’ve been in the same location for years. An expired lease or lack of a formal agreement can turn off potential buyers. If you don’t have a lease in place, now is the time to negotiate one. A flexible lease agreement, ideally with several renewal options, can significantly enhance the value of your business.
4. Clarify Intellectual Property Ownership
Intellectual property (IP) is a key asset, particularly for businesses reliant on brand identity. If you’re selling your business with valuable trademarks, logos, or other IP, ensure that ownership is clearly established and registered. Failing to register trademarks or incorrectly attributing IP ownership can lead to complications during the sale, especially if the buyer discovers that the rights are owned personally or by another entity. Register your IP and create a clear structure, ideally represented in a simple diagram, to streamline the due diligence process.
5. Prepare Your Business for Sale Like a Car Tune-Up
Think of the preparation process as a ‘tune-up’ for your business. While it may require an investment of time and effort, the payoff is worth it. Buyers are more likely to be attracted to a business that looks well-maintained and organized. And that could directly translate into a higher sale price.
Getting Ready for the Sale Process
The first step to selling your business is educating yourself on the process. Understand the potential hurdles, pitfalls, and what buyers will be looking for. Once you’re prepared to take the next step and want to ensure that your business is positioned for the best possible sale, contact us at 0420 970 369 to speak with one of our expert advisors. Together, we can help you get the highest possible return on your business sale.
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