- Contact a Business Broker: Get in touch with a business broker who will understand your business requirements, budget, financial readiness, personal experience, and background.
- Sign a Confidentiality Agreement: After verifying the buyer’s genuine interest, experience, and financial capability, the business broker provides an Information Memo and related documents. The prospective buyer further collects information through the broker, conducts site visits, and negotiates with the seller.
- Due Diligence with Advisors: Collaborate with advisors such as accountants and lawyers to evaluate the business of interest. Due diligence may involve reviewing various documents, including:
- Lease agreements, rent invoices, and miscellaneous expenses.
- Financial reports for the last 2-3 years, BAS (Business Activity Statements), and the seller’s financial records if available.
- Franchise agreements (if applicable).
- Contracts and invoices with suppliers and customers.
- Employee structure and salaries.
- Asset details and other relevant information.
- Licenses, permits, and intellectual property (IP).
- If possible, meet with business executives or senior management.
- Other relevant data.
- Submit a Written Offer: Before conducting a comprehensive due diligence, the buyer may be asked to provide a non-binding offer. This offer serves as an expression of interest and does not have legal effect. Buyers should complete part or all of the due diligence before submitting an offer. Once preliminary negotiations are complete, the parties can sign a Heads of Agreement, which outlines key terms and requires a deposit or earnest money to be paid into the broker’s trust account. Unless both parties agree otherwise, the deposit must be refunded to the buyer until contract exchange, although the buyer may bear related costs if they withdraw from the transaction.
- Contract Preparation and Signing: The seller’s lawyer drafts the contract, and both parties’ lawyers detail the contract specifics based on the preliminary agreement. The buyer must pay at least 10% of the contract amount as a deposit. In addition to standard text, the contract may include special clauses, such as:
- Non-competition clause: The seller agrees not to engage in a similar business within a specified time and area after selling the business.
- Contract contingent on lease: If lease transfer approval is not obtained, the buyer can withdraw without penalty.
- Permit and license transfer: If necessary permits and licenses are not successfully transferred, the buyer can exit the contract.
- Lease Transfer and Business Handover: Transferring or signing a new lease is crucial for small business ownership. Whether transferring the lease from the seller or establishing a new lease with the landlord, the goal is to secure the right to lease the premises where the business operates. Approval from the landlord is essential. When applying for lease transfer, the buyer must provide personal experience and financial information for the landlord’s review. Business handover includes lease transfer, licenses and permits, employees, training arrangements, assets and inventory, business name, intellectual property, customer data, and more.
