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It is inevitable that at some point in time, some business establishments will change ownership. Anyone who has a business for sale will find it wise to consider hiring a business broker because the process of selling a business can be very demanding and tiresome. It can eat up a lot of valuable time which [...]More info
The Business Sales Process can be long winded and very complex- a transaction takes months rather than weeks with many facets of the business being analysed. It’s important that you team up with someone you trust and can work with for the entire process. Here’s a breakdown of the steps that are involved in a transaction-
1) Initial Business Assessment- A confidential (information only) meeting is held with a business broker. In this meeting the broker will ask questions to get an overview of the business, find out about the owners day-to-day roles and collect the financial information. It is also an opportunity for a seller to ask questions and find out more about the broker.
2) Written Appraisal Given- After an initial analysis of the business and its financials, a full written appraisal is given to the seller outlining an estimated selling price, details of the sales and marketing strategy, as well as outlining all fee’s and costs payable.
3) Listing Agreement Signed- Before work commences, it is a legal requirement that a listing agreement (PAMD21) is put in place. This is a standard REIQ from.
4) Business information collected– All the relevant information that is needed for the sale is collected, analysed and organised. The business sellers assistance is needed to provide some of the information required.
5) Information memorandum is compiled- A thorough information memorandum is complied to show potential buyers, their financiers and accountants. This step may include having photos taken of the business.
6) Marketing strategy prepared- An advertising campaign is designed to attract the maximum amount of interest among buyers. It is then placed and advertised in the agreed places. Buyer databases may also informed about the opportunity.
7) Interest and Enquiries are Generated- After seeing advertisements in print or online, potential buyers contact the broker to gain further information on the business.
8 ) Buyer Confidentiality Agreement- Prospective buyers who contact the broker about the business are screened for financial capability as well as their current business interests. They are also required to sign a confidentiality agreement (indicating they are financially qualified) before receiving any sensitive business information.
9) Qualified Buyer meets with Broker- Once qualified, the broker will meet with the buyer (face to face if possible) to give them an overview of the business. This includes running over the features of the business, its operations and financial performance.
10) Inspection of the business- This provides the buyer with the opportunity to see the business up close. This only occurs with qualified buyers that have high level of interest in the business. This gives the buyer the opportunity to ask any questions to the owner about the business. These meetings are usually informal and last approximately an hour.
11) Pre Due Diligence- Key financial information is provided to the buyers accountant for advice prior to any offers being made.
12) Contract Drawn up- With the guidance of the broker, interested buyers are encouraged to present an offer in the form of a full written contract in which the conditions and contingencies to the purchase are established.
13) Offer Presented to Seller- The offer is presented and the seller may accept the offer as presented, or submit a counter offer.
14) Mutual Acceptance- Buyer and Seller agree to all the terms and conditions of the sale contract. This includes any special conditions the buyer and seller may have attached to the contract that must be satisfied before the settlement date.
15) Deposit paid- A deposit for the business is paid and held in the brokers trust account. The broker is responsible for sending the required documents to the solicitors for execution of the contract.
16) Due Diligence and Finance Period- The Buyer (and advisers) begins a detailed review of the business, which on average lasts for 3 weeks. This time period is also used by the buyer to remove and satisfy any conditions that may have been attached to the contract such as finance.
17) Transferring of Staff- The buyer notifies the seller in writing which staff members of the business that the buyer proposes to employ.
18) Stocktake- Between buyer and seller, a final count of the inventory is held and the final sale price is adjusted.
19) Settlement Day- All conditions of the contract have been completed and or satisfied. Buyer and sellers solicitors meet and execute all closing documents and assign the lease. Seller receives closing funds. Buyer is the new owner of the business.
20) Transition & Training Period- Buyer begins a pre-negotiated period of training and transition with the former owner. On Average this transition period can last any where between 2 to 4 weeks.
Please note that the sales process can vary from state to state- for more information on the sales process, please feel free to send us an email below.