Commercial and Business Lawyers

28 Essential Things to Do before Putting Your Business on the Market

To sell your business for a decent price start with some preparation. It will depend on the type of business, however examples include:

Financial Statements

Make sure that all accounts are up to date – any prospective purchaser will want to see at least three years profit and loss statements and balance sheets;
Tax Returns

Make sure that all tax returns have been prepared and lodged – a sensible purchaser will realise that if you have been cheating the tax office then you may well be out to cheat them as well;
Your Lease

Make sure the current lease has been formalised – if the business location is important for the continued success of the business, or if the purchaser is likely to want options to extend the lease, then the lease of the premises should be properly signed and registered with the Department of Lands. If your business location is crucial and it is likely that a prospective purchaser will want a longer lease, then it may be appropriate to negotiate with your landlord for a variation of your lease to add an option to renew;
Approvals

Make sure that your business is operating with all necessary consents from the relevant authorities. It is always good to be able to show a copy of the most recent Council Development Approval consistent with the permitted use shown in your lease;
Copy of Lease

Make sure that you can present the current lease for the premises – have the original lease (or if it is registered, then a copy of the lease) ready for inspection;
No Breaches

Make sure you are not in breach of your lease – all outstanding payments should be made to the landlord so that there is no problem with getting the landlord's consent for the assignment of the lease to the purchaser of the business;
Tidy Up

Make sure the business looks clean and well kept – necessary jobs around the premises such as painting, repairs, tidying up and the like should all be done;
Gardens

Make sure that the premises are not appearing to be rundown or showing any wear and tear – if the premises include any gardens then they should be spruced up;
Employee Records

Ensure your record keeping of your employees complies with the law – if in doubt check the Fair Work Act, the Fair Work Regulations or the government websites which are there to help you get this right;
Get Everything Up To Date

Make sure your employees' records are correct and up to date – the history of every employee and all their accrued entitlements should be properly recorded and any moneys owing to employees paid up;
Contracts

Workplace agreements and contracts of employment should all be properly filed on the employees' files – if your business has any “key persons” that are important for the continued profitability and stability of the business then the purchaser is going to want to know details about them;
Contractor Records

Any written contracts that you have with contractors should be up-to-date and signed copies available for inspection by the purchaser – if your business uses contractors the purchaser is going to want to know their history with your business and get a sense of whether they will be available to them;
Computers

The computers used in the business should all be functioning properly and there should be no pirated software anywhere in the business – you should be able to show that you have a good reliable internet service provider and good internet speed;
Manuals

Make sure that the technology side of your business appears to be well-managed – instruction books, operating manuals, peripherals and cables should all be properly arranged and available for inspection;
Your Website

Make sure that the business website is complete and works properly – every potential purchaser of your business is going to start by checking out your website. If your website takes too long to load or if it is not mobile friendly then this could be taken as a poor reflection on your business;
SEO

Make sure that if your business relies to any great extent on getting work from your website then you must have up-to-date Google Analytics, search engine optimisation statistics and AdWords results available for the purchaser – remember, you won’t be able to just dump these on the purchaser. If you want to impress then you have to be able to explain it to them.

Insurance

You must be able to show the purchaser the types of insurance cover that you carry – the purchaser will probably want to know something about your claims history, especially with WorkCover;
WHS/OHS

Make sure that if you are required to have occupational health & safety audits, certification of fire safety, records about previous contamination or the presence of asbestos then those records should be up to date and readily available. If you are not on top of the question of what’s needed, and do not have it readily available, then the purchaser is likely to assume the worst;
Intellectual Property

Make sure that you can produce all documentation relating to any intellectual property of the business including patents, trademarks, copyrights, business names, franchise agreements, advertising contracts and the like;
Permits/Licenses

Make sure that if your business requires any industry specific permits or licences (such as a liquor licence) then you must be sure that it is current and that there will be no difficulty transferring it to the purchaser;
Business Structure

Make sure you know and understand exactly who owns and manages your business – do not call it your business if it actually belongs to a company and make sure you are familiar with who the shareholders and directors are – your accountant may have done you some service by putting in place business structures such as companies, trusts, unit trusts, etc, but it won’t impress the purchaser if you don’t have your head around it;
Business Name

Make sure that if you operate under a business name you should check that the registration is up to date – if the goodwill of your business is dependent on you preserving your well-known business name then a purchaser will not be impressed if it is not properly documented;
Heads of Agreement

Make sure that before your business broker starts marketing the business you have ready a draft Heads of Agreement – but don’t over complicate it – if it’s more than one or two pages then it is probably going to cause more harm than good. Some business brokers like to cut-and-paste entire sections out of sale contracts to make up the heads of agreement but it should be very simple and deal with only the essential parts of the deal – get your lawyer to check it out before it is even used.
Confidentiality Deed

Make sure that, if appropriate, potential purchasers sign a confidentiality agreement or nondisclosure deed before you provide them with any sensitive information such as client lists, business secrets, employee records or anything else that might be of use to your competitors;
Draft Contract

Make sure that your lawyer (not your broker, not your mate and not yourself) prepares an appropriate draft contract for sale of business – don’t let them prepare a sixty-page document to sell a twenty thousand dollar hairdressing salon. The NSW Law Society standard form contract will properly cover the sale of most small businesses but it might need some additional clauses for your specific circumstances – it includes a list of attachments so make sure you give the relevant ones to your lawyer so that they can do their job properly;
Reason for Sale

Make sure you can clearly and honestly explain why you are selling the business – the purchaser will want to know why. Work out the reason why you are selling and be frank about. If you change the reason you are giving, or if you have various reasons or if you are making stuff up, then the purchaser is likely to sense it and get nervous, and think that you are untrustworthy;
Value

Make sure that you know exactly why the business is worth the asking price – if you have picked an asking price out of the air then the purchaser (or their accountants) will most likely see through it very quickly and then form a bad impression of you. You can ask your accountant to provide a calculation of the value of the business using one of the commonly used valuation methods – make sure you generally understand it;
AND MOST IMPORTANTLY AVOID GETTING SUED!

Do not mislead or deceive the purchaser, and do not let your business broker do it either – the law doesn’t allow it, and if it happens it will most likely be discovered and the purchaser will come back at you seeking compensation. The amounts could be very significant.