Most owners start thinking about a sale with a number in mind. Buyers start with a list of questions. The gap between the two is where sales slow down, prices drop and deals fall over, usually during due diligence, when the buyer’s lawyer asks for documents that turn out not to exist.
Getting the paperwork in order first is unglamorous, and it’s the best money you’ll spend on the sale.
What a buyer will ask for
the premises lease, and whether the landlord must consent to it being assigned;
contracts with major customers and suppliers, and whether they can be transferred;
employee details, contracts and accrued entitlements;
three years of financial statements and tax returns;
the licences, permits and registrations the business relies on;
ownership of the name, website, domain and other intellectual property.
If any of these are missing, out of date or held in someone else’s name, it’s far easier to fix now than in the middle of a negotiation.
The lease is often the deal
For many small businesses, the premises lease is the most valuable thing being sold. A buyer will want enough time left on it, with options to renew, and the landlord’s consent to take it over. Landlords can take weeks to respond and may ask the buyer for guarantees. Raise it early.
Staff and their entitlements
When a business is sold, employees may move across to the buyer, and their leave entitlements need to be dealt with in the contract. Decide early whether staff will be offered roles and how accrued leave will be reflected in the price. Your team will hear about a sale sooner than you expect, so plan what to tell them.
Structure affects tax
Whether you sell the business’s assets or the shares in the company that owns it changes how the sale is taxed and what the buyer takes on. If the sale qualifies as a going concern, GST may not apply. Talk to your accountant before you agree on a structure, not after.
Expect a restraint on you
Most buyers will ask you not to compete with the business, or approach its customers, for a period after the sale. That’s reasonable; they’re paying for the goodwill. Make sure the period and area match what you actually plan to do next.
Heads of agreement, then the contract
Once you have a buyer, a short heads of agreement records the price, structure, timing and key conditions before the full contract is drafted. It usually isn’t binding on the main terms, but it heads off misunderstandings and gives both lawyers the same starting point.
Daniel or Ben will go through your folder with you, flag what a buyer’s lawyer will ask about, and give you a fixed quote for the sale before you sign anything with a broker.
