How to sell your business

February 2021

Selling your business usually means there are two key components in play: Structuring the transaction and positioning the business to the market. Both elements are important and can significantly impact the outcomes of the sale.

Business owners often ask about the best way to sell a business. There are many factors at play in the valuation and ultimately the sale, but two critical components – structuring the transaction and positioning the business in the market – are critical to get right.

Focus on getting the essentials right

Structuring the transaction covers things such as pricing the business, the terms and conditions attaching to the sale, key terms in the contract, and ensuring the transaction structure is as tax effective as possible. Much of the structuring is about ensuring the vendors secure the most efficient and effective outcome from the sale. It is about maximising vendor position.

Positioning the business for sale is all about ensuring that you achieve a sale and that maximises your price.  It covers areas such as ensuring there are no hurdles within the business that will limit its saleability, identifying the competitive position of the business within its market segment, ensuring that operating performance is as good as it can be, and that the business benchmarks well in its market. Positioning also includes identifying the best time to take the business to the market, how to take it to the market, and who the most likely buyers will be.

How is structuring the sale and positioning the business different?

Positioning is about doing everything needed to maximise the probability of a sale occurring, whereas structuring is about getting the best outcome from a transaction once it has occurred. A lot of people make the mistake of spending most of their energy on the structuring of the transaction. It is important but it only becomes important if the sale is achieved.

To do this, you need to get an objective assessment of how the business compares in its market, its competitive position, and what, if any, impediments to sale exist – all the things a buyer will look at and look for when they assess your business.

Most buyers believe that we are currently in a buyer's market and will try to drive down price expectations.  Whether or not you are in a buyer's market depends on your industry segment but regardless of this, you are in a competitive market. Buyers may be comparing your business with similar businesses but also opportunities in other industry segments.

Securing a sale at the best possible price is about having your business positioned for sale.  Preparation time is needed to achieve this so talk to us well in advance of putting your business on the market.

There are other factors at play

If you are considering selling your business – or setting it up to sell down the road – we strongly recommend working with our team to ensure you're setting up for success. Contact us on 02 9957 4033 or email us here for additional guidance.

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This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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