Guide on selling a business in Australia: Tips, steps & more

Selling a business isn’t as simple as selling a car. Depending on its size and complexity, you may need to gather documentation, obtain a valuation, advertise, negotiate, and draw up a contract. All this must be done while complying with Australian employment and tax obligations.

We’re here to help with this simplified, step-by-step guide to selling a business in Australia.

Is selling the right decision?

Selling a business can be a big deal. Assess the key reason behind the sale, whether it’s retirement, relocation, ill health, a work-life balance adjustment, cashing in on your success, or freeing up time to try something new. Will selling your business actually help you accomplish your goals?

Analysing motives ensures you’re making the right decision and gives the buyer peace of mind. Would-be buyers need reassurance that your business has been running smoothly for some time, and there is a legitimate, non-performance-related reason for the sale. Supporting documentation could help put nerves at ease.

Things to consider before selling your business

There are several points you should ponder before rushing into a sale, such as:

• Hiring help: Lawyers, financial advisers, accountants, and business brokers can provide invaluable advice – but at a cost.
• Documentation You will need to dig up 3 years of financial records to prove viability, including balance sheets and profit-and-loss statements.
• Privacy: You must comply with Australian Privacy Principles¹ when disclosing personal information about customers, suppliers, or employees.
• Due diligence: Buyers generally conduct thorough due diligence, combing through your legal and tax records – is everything in check?
• Liabilities: You may wish to settle any outstanding debts held against your business on the Personal Property Securities Register (PPSR).
• Employment obligations: You must provide employees with written notification or payment in lieu, and finalise all employee payments, including entitlements, termination, and taxes.²
• Capital gains tax: Selling a business might require paying capital gains tax, though concessions may apply to some small businesses.¹
• GST: GST could apply to the sale of your business or assets, and you may need to repay any GST credits.¹
• Costs: Selling a business can become expensive once you factor in business broker commission (approx 5-10%) and legal, accounting, or marketing fees.
• Timelines: Selling a small business usually takes 6 to 18 months.

How to sell a business in Australia: A step-by-step guide

When selling a business, the precise procedures can vary by business and industry. Nonetheless, the following steps provide a general guide.

1. Decide whether to enlist professional help

A range of professions can help streamline the sale process, including lawyers, accountants, bookkeepers, and financial advisors. More importantly, the right advice can increase the final sale price and reduce the risk of making costly mistakes.

Some sellers hire a business broker, a professional specialising in business sales. The broker provides customised advice on profitability, legal obligations, market trends, and more. You can double-check for credentials on the Australian Institute of Business Brokers website.

Of course, high-level consulting doesn’t come cheap. Whether or not getting professional help is worth it depends on your business and specific circumstances.

2. Defining what you’re selling

To create an accurate valuation, you must first understand exactly what you’re selling. Consider whether you’re including assets, such as property, equipment, inventory, and customer lists.

Valuators split assets into two key categories:

• Tangible: Physical things, such as machinery, vehicles, real estate, tech, appliances, furniture, etc.
• Non-tangible: Non-physical components like intellectual property, names/logos, websites and domain names, reputation, client databases, contracts, etc.

Some non-tangible assets can be challenging to quantify.

3. Gather documentation

Obtaining documentation on your assets and business performance can underpin your valuation and appease cautious buyers.

• Financial documents, such as profit-and-loss statements, balance sheets, and cash flow statements, prove profitability and highlight your net worth.
• Gathering and transferring customer contracts and supplier agreements can significantly increase your business's value.
• Documenting Standard Operating Procedures (SOPs), such as how and when specific staff perform certain tasks, can help the new owner pick up where you left off.

4. Obtaining a business valuation

Finding the right price to sell your business is easier said than done. Some of the most commonly-used methods include:

• Market comparison: Comparing your business to others on the market that have sold recently.
• Asset net worth: Adding up the total value of your assets, then subtracting the total value of your liabilities.
• ROI: Calculating the value based on your Earnings Before Interest and Tax (EBIT).
• Creation cost: Valuing your business based on the cost of creating a similar new business from scratch.

An accountant, business advisor, or business broker can help you choose and implement the most suitable approach. Buyers may wish to see how the valuation was calculated, so consider keeping a written record.

5. Finding a buyer

Many entrepreneurs sell to their immediate network – family members, business partners, employees – as they already have a close relationship and understand how the business works. Others also approach suppliers, competitors, or even customers to broaden the pool of potential buyers.

Some business owners look for buyers on digital marketing channels such as social media and pay-per-click advertising, as well as traditional media like TV and radio.

If you’ve contracted an accountant or lawyer, they might know of a suitable buyer. Business brokers specialise in finding buyers, but the commission can be high.

6. Making the sale

If you have multiple prospective buyers, setting a reasonable timeframe allows everyone to make an offer, potentially increasing the final sale price.

Once you have identified a preferred buyer, the next step is to provide accurate and comprehensive documentation for them to review. Expect the buyer to conduct exhaustive due diligence to verify every detail.

Your buyer may try to negotiate the cost and terms. You will need to reach an agreement on the sale price, payment terms, settlement period, conditions, and handover and training processes. Some buyers might set conditions, such as a minimum level of profitability after handover.

Tips for maximising your sale price when selling a business in Australia

With a little strategic thinking, Aussie business owners can maximise their return when it comes time to sell and here’s how you can do that:

• Timing your sale: Selling when your business is growing typically leads to a higher price.
• Keeping up appearances: Investing in your online presence, maintaining equipment, and tidying property can improve perceived value.
• Thorough documentation: Meticulous documentation can help buyers better understand and trust your brand.
• Reduce owner dependency: Remove yourself as a key figure for success by hiring managers and drafting clear Standard Operating Procedures (SOPs).
• Ensuring compliance: Reviewing contracts and employment, tax, and legal obligations helps avoid unwanted discoveries during the due diligence stage.
• Build EBIT: Improving your Earnings Before Interest and Tax could greatly increase the final sale price.
• Cross-currency solutions: Finding a cost-effective cross-currency transfer platform could save you heaps of money if you’re moving overseas after the sale.

Wise Business: Smarter way to move capital across borders

Considering selling your business and moving overseas? Wise Business lets you send the profits abroad with you for a very reasonable rate.

With Wise Business, you can trade your hard-earned AUD for another currency at the mid-market exchange rate without hidden markups. Our low, transparent pricing policy lets you know the cost of a transfer up front.

Wise Business helps streamline overseas business payments without foreign transaction fees, saving up to 3x compared to other providers.

• Free to register — Send money to 140+ currencies with no hidden exchange rate markups
• Make up to 1,000 transfers at once with the Wise batch payments feature
• Fast, low-cost payouts to customers, freelancers, employees, investors, and suppliers globally
• Automate invoice payments, recurring transfers, and international payroll
• Fast and fully secure payments through Wise, even for large amounts

Tired of hidden fees and complex processes when making overseas payments?

Start sending with a Wise Business account! 🚀

This general advice does not take into account your objectives, financial circumstances or needs and you should consider if it is appropriate for you.

FAQs

1. Do I need to pay tax when I sell my business in Australia?
You may be required to pay GST and capital gains tax when selling a business in Australia.

2. How can I get an accurate valuation for my business?
You can use one of several valuation approaches – market-based, asset-based, or the earnings-multipliers method – to obtain a reliable business valuation. Due to the potential complexities, some businesses hire a business broker to perform these calculations.

3. How do I sell an online or SaaS business?
To sell an online software business, start by maximising the valuation through strong performance and predictable recurring revenue. Next, you should gather documentation, obtain a valuation, find a buyer, and then negotiate the sale.

Sources:

1. Business.gov: Sell your business
2. Business.gov: Manage employees when you sell a business