Selling a Business

The selling of a business involves selling a bundle of assets and rights. When trading in businesses there are usually three basic types of assets that are sold:

• Plant and Equipment
• Stock
• Goodwill

Plant and equipment are invariably sold at its written down value and stock is usually sold at cost price. The added reward that Business Vendors earn lies in the goodwill that they can claim as part of the total price.  A Purchaser will usually be prepared to pay a price for goodwill if the purchaser believes that it will provide him or her with access to future business security and higher profits. It is important to note that Goodwill is that it is an intangible asset and its value is subject to the market perception of the intrinsic value of your business.

At P&B Law we can direct you through the sale of your business and guide you on issues including:

• Planning your sale:
  You should obtain sound Legal and Accounting advice prior to engaging a business broker or advertising your business for sale.
• Reputation: 
  A purchaser will ask customers and suppliers about your reputation.  Make sure you give them no cause for concern.
• Trading History:
  A well documented provable and successful trading history is an essential part of establishing your credentials in claiming goodwill.
• Business Plan: 
  Where is the business going? A well documented business plan detailing opportunities and areas for expansion may be provided. 
  Note: You should obtain legal advice prior to submitting a plan to a purchaser regarding the inclusion of relevant disclaimers.
• Trademarks: 
  A trademark provides you with legal protection of your product or service logo.  It generally means that your logo can be used to the exclusion of others and is a very effective way to ensure that your product can be easily distinguished from those of your competitors.
• Key Sales Contracts: 
  It is prudent to properly document key sales contracts with major customers.  A purchaser’s solicitor is likely to carefully examine agreements of this nature.
• Property Leases: 
  Does your business depend on its location? A well structured fair lease will ensure that you have a right to remain at the location well into the future and that you can transfer the lease easily.
• Terms of Trade:
  Do you offer credit terms to customers? It is important to make sure that your terms of trade are well documented and provide you with adequate protection and retention of title clauses.
• Key Personnel: 
  You should made sure that any key personnel have well drawn employment contracts to ensure a smooth transfer with the business.

This list is not exhaustive and you should consult a properly qualified legal professional to assist you with any queries you may have regarding the selling of a business.

Planning your sale, Key Sales Contracts, Terms of Trade...