Selling a business is an exciting milestone, but the business settlement process is often daunting. After all, it’s not just money you’re exchanging—it’s years of hard work and dedication. Here are ten essential tips to keep in mind to ensure the sale goes smoothly and business settlement is a breeze.
Get professional advice
It’s always best to get advice from business settlement professionals with experience in buying and selling businesses. For instance, business brokers, lawyers and conveyancers can provide invaluable advice on the best ways to protect your interests and ensure you get the best deal.
At Strand Legal and Conveyancing, we can help you understand your legal obligations as the seller, provide valuable advice on how to get the most out of the sale and settle the deal. We can also help you prepare legal documents, such as letters of intent and contracts.
According to Kerry Cable, Business Manager at Strand Legal and Conveyancing, “Business settlement, unlike a property settlement, requires more than just the transfer of legal title. For example, you may need to include clauses such as warranties, indemnities, confidentiality and intellectual property.”
Consider tax implications
Like when selling a property, it’s important to consider the tax implications of selling your business before entering into any contract negotiations. Speak with an accountant to determine how much tax you’ll need to pay on any profits made from the sale and whether there are any tax deductions you could claim.
Research potential buyers
Do some preliminary research on potential buyers for your business before entering into negotiations with them. Make sure they have a good reputation in the industry and enough financial resources to complete the transaction. Some sellers even go as far as to ensure that potential purchasers share similar values and goals so that the business continues to thrive after its sold. However, it’s important to remember that not all buyers are alike. So ensure all your liability ends with the sale.
Prepare financials and records
Before beginning negotiations with potential buyers, ensure you have all necessary financial records up-to-date and ready for inspection. Examples include all company and personal accounts related to the business, such as loan agreements, contracts and leases. Preparing these documents beforehand will make negotiations easier and quicker for both parties involved in the business settlement transaction process.
Know your worth
Before beginning negotiations, you must know your business’s market value so you don’t undersell yourself or get taken advantage of by a potential buyer. Speak with professionals who specialise in valuing businesses so that you can determine an accurate and realistic value for your business before entering into any contract negotiations.
Review the contract
Before signing a sale contract, carefully review all the clauses. Ensure details are accurate and the spelling of all names is correct. Also, ensure the dollar amounts are right, along with any additional terms and conditions, payment schedules, and warranties.
“If you’re unsure about anything, speak with a lawyer or conveyancer who specialises in commercial transactions and business settlements. They’ll answer any questions or concerns that may arise during this process,” says Kerry.
Set a deadline for the completion of sale
Just like selling a property, set a reasonable deadline for the completion of the sale. That way, both parties clearly understand the deadline for completing paperwork and when payments must be made. While these details are usually part of the business settlement paperwork your conveyancer or lawyer attends to, it’s essential to ensure that all parties agree on the sale and handover timeline.
Protect your Intellectual Property
When selling your business, clarify if the sale includes intellectual property. For example, if you have developed a brand, logos or website design, these should be formally transferred over to the new owner. The same applies to trade secrets and customer lists, which should remain confidential even after the sale is complete.
Conversely, you might exclude intellectual property in the sale because you plan to continue using the brand name for another venture. Alternatively, the sale contract may not have a ‘non-compete‘ clause. In either instance, seek advice from a lawyer specialising in intellectual property.
Have an exit strategy in place
Before signing off on any sale contract, establish an exit strategy. That way, you have peace of mind if anything goes wrong during negotiation or post-sale processes. For instance, securing additional funding sources should something happen during the handover period or having other potential buyers lined up should negotiations fall through at the last minute.
Don’t let emotions take over
During negotiations, it’s perfectly normal (and even expected) for emotions such as stress, anxiety and excitement to come into play. However, it’s important not to let these feelings take control over the decision-making process and cloud judgement when making important contractual decisions regarding the sale of your business.
Selling a business is no easy task, but with the right business settlement team and knowledge of your business’s worth, you can navigate business settlement successfully. However, before signing the sale contract, review it thoroughly, set a reasonable timeline for the completion of the sale, protect intellectual property rights and have an exit strategy in place just in case. Most importantly, don’t let emotions cloud judgement when making important decisions regarding the sale. With these tips in mind, you’ll be ready to take on any potential buyers knocking at your door. And remember, when it comes to the business settlement process, you can rely on Strand Legal and Conveyancing’s professional expertise.