1. Legal Fees: This includes the cost of attorney for contract preparation and negotiation as the seller. If there is a lease transfer involved, typically, the seller may also be responsible for the landlord’s legal fees, which can sometimes be shared with the buyer.
2. Business Brokerage Commission: If you complete the transaction through a broker, you will need to pay a brokerage fee.
3. Advertising Expenses: If you decide to advertise and promote your business, you will incur upfront expenses such as advertising fees and costs for preparing business Information Memorandum.
4. Accounting Fees: If the buyer requires additional documentation and support for due diligence, there may be associated accounting fees incurred by the seller.
5. Inventory Appraisal Costs: If your business includes inventory, you may need to engage a third-party inventory appraisal company and pay fees based on a certain percentage of the inventory.

The following three items are the company’s liabilities and are not considered direct costs of selling the business. However, they must be paid before the business settled:

1. Accounts Payable: Any outstanding payments to suppliers or landlords, including unpaid rent, must be settled before the transfer.
2. Taxes: Various unpaid taxes may need to be paid before the business transfer is completed.
3. Employee Expenses: Accrued employee vacation and other benefits, such as long-term service benefits, must be converted into monetary payments before the transfer takes place.”

Preparation is key to a successful business sale. It involves organizing materials and effective advertising.

1、Materials Preparation: 

1. Financial Records: Include three years of financial reports, BAS, and preferably tax returns. Clear, accurate financial data is crucial. Maintain good record-keeping habits. Address confidentiality concerns through buyer-signed non-disclosure agreements or phased disclosures.
2. Lease: Include lease documents, rent invoices, utility bills. If the lease is expiring, obtain a new lease intent statement from the landlord or agent. Lease stability greatly impacts business value.
3. Employee Structure and Wages: Describe staff roles, experience, payroll for full-time, part-time, or casual employees. Buyers prefer businesses with efficient management or those that can operate with minimal owner involvement.
4. Franchise Contracts and Invoices: Clarify franchise terms, fees, and revenue-sharing agreements for franchise-based businesses.
5. Supplier and Customer Contracts: Highlight significant supplier or buyer relationships that contribute to the business’s value.

2、Advertising: Prepare a comprehensive Information Memorandum for efficient communication with potential buyers. Advertising can be done via business sale websites, social media, or word of mouth. While social media is popular, business sale websites offer a wider reach and attract more prepared buyers. Engage business brokers for effective advertising on multiple platforms, maximizing your chances of success.

There are various complex formulas available for calculating the value of a business, and you can find numerous methods through online research.

However, for small businesses, we recommend a straightforward approach to valuation: multiplying the owner’s actual profit by a multiplier. Actual profit includes pre-tax business earnings, owner’s salary, and personal expenses covered by the business. The multiplier can be determined based on factors like the industry and operational conditions, with a typical range of 2 to 3 as a reference.

For example, let’s consider a financial report where the pre-tax business profit is 50,000 AUD, the owner’s salary is 40,000 AUD, and personal expenses covered by the business, including items like vehicle expenses, family salaries, and shareholder dividends, amount to approximately 20,000 AUD. In this case, the owner’s actual profit would be 110,000 AUD. If you use a multiplier of 2, the estimated value would be 220,000 AUD; if the multiplier is 3, it would be 330,000 AUD.

There are various strategies to legitimately optimize tax efficiency. Experienced buyers consider more than just financial statement profits and conduct a comprehensive analysis of actual earnings. However, when selling a business, it’s advisable to ensure that financial reports clearly reflect the business’s operational activities and profitability to facilitate the buyer’s estimation. This requires effective communication and advanced planning with an accountant.

The specific multiplier to use depends on various factors specific to the business, including the completeness and verifiability of financial data, the stability of income and profits, the extent to which the business relies on the owner versus management, the presence of supply contracts, the remaining lease term, and the reasonableness of lease terms.

For precise valuation guidance, we recommend consulting with both accountants and business brokers.

In the realm of business brokering, the typical duration for selling a business averages around six months, though instances of rapid sales can be attributed to fortuitous circumstances. Several pivotal factors come into play during this process:

Pricing: The art of setting the right price is paramount. As long as the business holds inherent value, potential buyers are in the offing. An attractively priced offering tends to lure prospective purchasers. For expeditious sales, contemplating a reduced price may be prudent.

Operational Condition: Effective and astute business management stands as a cornerstone. A clear and orderly financial record, a robust organizational structure, the absence of debts and legal entanglements, stable relations with suppliers and clientele, and judicious lease terms collectively serve to hasten the transaction.

Preparation: Meticulous preparation begets buyer confidence and bolsters their willingness to extend offers promptly. This encompasses comprehensive documentation, secure and sufficiently lengthy lease agreements, well-managed inventory levels, and the seller’s psychological readiness to make decisive determinations.

Advertising and Promotion: Even for thriving businesses, promotion remains imperative. Advertising facilitates outreach to a broader spectrum of potential buyers. Sellers are well-advised to earmark an appropriate budget for advertising endeavors.

Role of Legal Counsel: Legal professionals occupy a pivotal role in this transaction. Their expertise, diligence, and acumen in business affairs influence the fluidity and timing of the deal.

Selection of a Business Broker: The selection of an experienced business broker, whose domain of expertise aligns with the specific industry, is of paramount importance to the successful culmination of the transaction.

In conclusion, embarking on the journey of selling a business necessitates comprehensive preparation, encompassing psychological readiness, personnel readiness, and meticulous business groundwork. Best wishes for your endeavor in business brokering.