Selling your Business. Is it market ready?

business store front with for sale signs in windows.

When you’re selling your business, the information or sales memorandum drives the start of your sale process. It is key to motivating a buyer to the next stage – signing a contract subject to conditions and conducting due diligence on your business. While presenting your business in the best light, it must be grounded, easy to read, and concise. What does the business offer? Why are you selling?

What would you want to know in the buyer’s position? Put yourself in the buyer’s shoes.

What are you comfortable revealing? There is no commitment to buy at this stage and it is important not to put sensitive information into the public sphere.

Consider a selection process so you are only giving the sales memorandum to serious prospects. Ask prospective buyers to sign a non-disclosure agreement before you make the memorandum available. Flag this in your early discussions.

Be conscious that a carelessly worded email may come back to bite you. Check everything thoroughly before you hit send.

How should you transact the move from sale memorandum to due diligence? One option is to propose a letter of intent before your prospective buyer proceeds into due diligence or while waiting for a formal agreement to be drawn up. This states the general intention of both parties and agrees key terms. It may identify deal breakers and transitional provisions. It can be long and detailed or short and basic and can involve considerable negotiation. Have your legal advisor on board for this.

In most NZ small business sale situations, the next stage is to sign a contract subject to conditions like finance and due diligence. This gives the prospective purchaser exclusivity to conduct due diligence and shows commitment from the purchaser to reach a settlement. When the conditions are confirmed then the contract goes unconditional, and a non-refundable deposit is paid.

What is a “good listing”? Clyth Macleod are business brokers – they buy and sell businesses. You may or may not want to go through a broker. They have some simple advice to help you achieve the best possible price. Read their 10 commandments here.

If you are thinking about selling your business, we can take you through the sales process and discuss what would work best for you. We’ve heaps of experience on both sale and purchase transactions and can help make this as stressless as possible.

Get in touch with our team to start the discussion.

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