So, you’re considering selling your business, but you’ve got a lot of questions –
- How do you prepare to sell your business?
- What is the process for selling your business?
- How long does it take to sell your business?
Here we’ll cover these questions so that you can start your sale preparation in good time to achieve a desirable and smooth exit process.
What is the average time an Australian business takes to sell?
You want to move on, so you’ll need to estimate how long it will take to sell your business. Of course, there’s no one size fits all answer to this question, but many business brokers suggest that it usually takes between 6-12 months to sell your business.
With that in mind, you should begin your initial preparations, ideally, probably around two years before you want to exit your business. This is so you aren’t forced to accept a lower price because you run out of time, or you end up having to work long past your preferred retirement date. Sometimes, however, this is not possible.
What steps are involved in selling your business?
Selling your business can be a complex process. It’s not something you can rush through quickly if you want to find the right buyer and maximise your return. It’s a big decision, so here are the steps you need to go through to sell your business.
1. Decision-making and goal-setting
Your reasons for selling your business will determine what your goals are. Before you start the process of selling your business, it’s important to assess your motives, timing, ideal buyers, and desired outcomes. Here are some questions to ask yourself:
- Can I achieve my long-term goals by selling my business?
- Is it possible to achieve my goals without selling my business?
- Can I achieve any non-financial goals by selling my business?
- Would I be happier and healthier if I sold my business?
- What will I do with my time after I’ve sold my business?
- Are market conditions ideal for selling my business now?
- How do my competitors affect my decision to sell?
- How much is my business likely to be worth? Is it enough?
- Is the value of my business going up or down?
- Is my business ready to be sold?
- Am I totally committed to the idea of exiting my business at this point?
Having a great understanding of the reasoning behind your decisions allows you to set clear goals for selling your business.
2. Preparing to sell your business
This step can take several months or even years. You’ll need to spend time ensuring your business is in the best possible shape to be sold to achieve a maximum price – and be appealing to a potential buyer.
This could involve updating your operational processes and documentation, managing internal communications to staff so they are prepared for the transition, and getting all your financial records up to date and accurate. Clear systems and organised databases now will give you the best chance for success when the time comes to sell your business.
Now is the time to put anything right that isn’t working optimally in your business – before you get a formal valuation. Major problems could have a significant adverse impact on the valuation. If you have outstanding disputes hanging over your head, work on getting these resolved in advance of your valuation. Consider working with a professional advisor during this step to identify any issues and consult on how to make the right changes to optimise how much your business is worth.
3. Business valuation
There are several different approaches for how to value your business. Putting your finger in the air and coming up with the amount you’d like to achieve on sale isn’t likely to get you an appropriate sale valuation…
The value of your business may be affected by many internal and external factors, such as the contracts you have in place for future work, the general economic climate, and more specifically what’s happening in your industry. Work with an experienced business broker or advisor who knows the best way to value your specific business to achieve your financial goals.
4. Finding the right buyer
It can be challenging to know where to look to find a buyer for your business, so working with a broker could be the best way to shorten this part of the process. Brokers have great contacts in the business world. They can find out from other brokers and professional advisors which buyers are currently in the market for a business like yours.
Of course, you can also use your own professional network and advertise your business for sale on specialist forums and websites. The more interest you generate, the better your chance for selling your business at a good price and reaching your goals.
5. Getting an offer
Receiving an offer to buy your company is exciting – but it can take some time to get a secured deal, so prepare for some negotiations. An initial offer doesn’t constitute a legally-binding contract!
At this stage, a buyer will indicate their interest and initial view on the value of your business. If the offer price isn’t acceptable, then this is where negotiations can begin on price and the deal structure until all parties are happy. The devil is in the details, so make sure you fully understand all the different aspects of the sale agreement and keep your goals in mind throughout.
6. Wrap up the sale of your business
Negotiating the terms and conditions of the sale requires a cool head. If you are finding the process of letting go of your business emotionally challenging, it’s vital to have a trusted professional to broker the sale for you.
At this stage, you’ll need to be prepared to let a potential buyer carry out detailed due diligence on your business, interrogating your financial records, contracts, and other documents. This part of the process could take a week or two, or it could take several months. It all depends on the size and complexity of your organisation.
Ensure you get an NDA in place before this happens to protect yourself. Part of your sale negotiations will include specifying how much support you will give the owner post-sale in helping them get up to speed with how things work. If your buyer needs to obtain additional financing to close the deal, this can add significant delay into the process or even cause the deal to fall through despite all paperwork having been signed. The deal’s not done until you have the money in your bank.
7. What to do after you sell your business
There may be a significant period after the sale is completed when you are required to spend time still working in the business until handover and training is completed. Your buyer could need a lot of handholding in the early days to ensure the continuing success of the business, so it could be a while before you can hang your business hat up indefinitely.
Typically allow around 2-3 months for the handover to be finalised. Factor this into your planning if you have a hard deadline for exiting your business.
Sell your business with expert support
Selling a business is a significant job, so it’s recommended that you seek professional advice to get the best possible outcome. Check out my Ultimate guide to selling your business in Australia, which takes you through the process from start to finish.
To find out more about the current state of your business, take the ‘business health check’ today.
For more support in preparing your business for sale, valuing your business and managing the negotiations, contact me on 0448 000 010, message me on LinkedIn or email me at eddie@eddiesentore.com
