Sales Process

Steps to Selling Your Business

Selling a business is a complex procedure. Whether it’s your first time, or you’re an experienced seller, it’s very easy to forget things and to feel overwhelmed.

While you should always feel comfortable asking questions, the following will give you a better understanding of the process.

STEP 1 PLANNING

Owner interview and data gathering

This gives us a clear understanding of the history and the performance of the business.

Recast financial statements

Normalising the accounts involves adjusting the accounts by adding back interest on debt that won’t transfer, one-time non-recurring expenses and to remove benefits accruing to the owner that aren’t related to the actual operation of the business. This can be completed in conjunction with your accountant.

Provide opinion of market price range

We prepare a written appraisal of the business utilising various valuation methodologies including a market comparison to other similar businesses that have been sold.

Obtain authority to sell

This agreement authorises Switch Business to act on your behalf. It outlines our fee structure and both parties' responsibilities.

Prepare business information memorandum (IM)

This document will eventually be released to qualified buyers who have completed a confidentiality agreement. It is very important that it is a true representation of your business. It provides preliminary information on your business enabling purchasers to determine whether it fits their buying criteria.

STEP 2 MARKETING

Implement marketing programme

Any marketing that is undertaken will not identify your business (unless agreed upon). Switch Business uses a multi-faceted approach, with our database of qualified buyers being the most powerful. As standard we market via our website, realestate.co.nz, nzbizbuysell.co.nz and trademe.co.nz. 

Screen response

Initial discussion with interested parties to ascertain whether the business fits their buying criteria.

Obtain confidentiality undertaking

This is obtained from all purchasers before we reveal any information that could identify your business.

Qualify buyers

This is to ensure that they have the financial resource, business experience and commitment to complete the transaction.

Present information memorandum

The purchaser is provided with the IM (which you have previously signed off on).

Determine buyer interest

Once the purchaser has studied the IM we follow up to ascertain whether they have any interest in pursuing the business purchase further.

STEP 3 NEGOTIATING

Arrange first visit

We generally have this meeting outside of the office, so as not to disrupt the business. If a site visit is required this is usually arranged after hours.

Provide further business details

As a result of the initial meeting, the purchaser will have a list of questions to be answered.

Negotiate offer from purchaser

This will generally be in writing as a Sale and Purchase Agreement or a Heads of Agreement. The agreement sets out all the terms and conditions of the offer and will almost always be dependent on the purchaser completing due diligence to their satisfaction. In most cases we would likely have more than one purchaser proceed to offer stage. 

Facilitate negotiations

Switch Business will lead the negotiations on your behalf to ensure you receive a premium price for your business. You will be advised to seek the relevant legal and accounting advice from your other advisors.

Obtain sale and purchase agreement

Once both parties have signed the contract there are now various conditions that need to be satisfied.

Agreements to solicitors

Each original contract is sent to the respective solicitor.

STEP 4 DUE DILIGENCE

Assist in satisfying conditions

The contract is usually conditional on due diligence, finance and if a lease is involved, upon obtaining the landlord’s consent for the assignment of the lease. Switch Business is involved in all steps of this process and will liaise with professional advisors to ensure that all conditions have been satisfied.

Due Diligence

Due diligence is the process where the purchaser along with their accountants and solicitors will examine the business in more detail. This usually involves an audit of the company’s financial and non-financial position and performance. Until this stage most of the information provided has been accepted on its face value and now the purchaser would like it verified. This process normally takes between 15 to 20 working days depending upon the complexity of the business and also on the ease in which information is made available. Switch Business works closely with all parties during this process, ensuring that any confidential information is protected and that the day-to-day operation of the business is not disrupted.

STEP 5 CLOSING

Confirm unconditional

The contract is usually declared unconditional in writing by the purchaser’s solicitor, and both parties must honour the agreed transaction.

Deposit into trust account

Once the contract is declared unconditional, Switch Business will ensure the deposit is paid into their audited trust account and be dispersed according to the relevant law.

Settled sale

During the period between when the contract is declared unconditional and possession takes place, both parties and their accountants and solicitors will attend to any legal requirements that need to be finalised. A stock take is usually done before settlement and the settlement sum adjusted to reflect the value of stock (stock is calculated at cost price with any adjustment made for old and obsolete stock).

Seller’s assistance

The Vendor will generally be required to assist the new owner in the running of the business for an agreed period of time (usually up to four weeks), payment for this period is included in the purchase price. Any assistance beyond this period is usually by prior mutual agreement at an agreed rate of compensation.

SUMMARY

To a first time seller the above process may seem overwhelming, however Switch Business has been involved in hundreds of successful sale transactions and are able to lead you through the process.

If you wish to have a confidential, obligation free chat or come in for a coffee, contact us today.