Planning your exit: selling or handing on a business
Every owner leaves their business one day - by selling it, handing it on, or closing it. Those who plan years ahead usually get a better price and a smoother handover. This guide covers your options, how to prepare, how valuation and the sale process work, and when to get professional help. It's general information, not financial advice.
In short
- Start planning years before you want to leave, and write a succession plan even if you're not selling soon.
- Your options include selling to an outside buyer, a family member, a partner or staff, or closing the business.
- Make the business easier to sell - clean records, documented processes, less reliance on you, and secure key contracts.
- Get a professional valuation, and use an accountant, lawyer and possibly a business broker.
- Tell employees at the right time and understand your obligations to them when the business is sold.
Your options
| Option | Things to consider |
|---|---|
| Sell to an outside buyer | Often the best price, but needs preparation and time to find the right buyer |
| Hand on to family | Keeps the business in the family; needs fair arrangements with other family members |
| Sell to a partner or staff | They know the business; they may need help with finance |
| Merge with another business | Can be a stepping stone to retirement |
| Close the business | When a sale isn’t possible; still needs planning |
Start with a succession plan
business.gov.au says succession planning helps you transfer your business when you retire or leave, and you shouldn’t leave it to the last minute. It has a free succession plan template. Its tips:
- Choose the right successor: a family member, employee, business partner or outside buyer who has the skills (or can develop them), wants the business and can afford to buy you out.
- Value your business regularly.
- Document your processes, so vital knowledge doesn’t leave with you.
- Plan for a sudden transition, such as illness or injury.
- Keep it current.
Make the business easier to sell
Buyers pay more for a business that runs well without the owner.
- Clean, up-to-date financial records for several years. See Financial management.
- Documented processes, so someone else can run it. See Systems, processes and quality.
- Less reliance on you: a team that handles customers, suppliers and daily decisions.
- Secure key contracts: leases, supplier agreements and major customers, ideally transferable.
- Spread your customers, so no single customer is a big share of sales.
- Tidy up: equipment in good order, disputes resolved, registrations and licences current.
The sale process
business.gov.au sets out 10 steps. In summary:
- Make sure selling is the right decision. Buyers will ask why you’re selling.
- Decide whether to use professionals: an accountant, lawyer or business broker. Check a broker’s credentials.
- Decide what’s for sale: assets, business name, intellectual property, property.
- Value your business. business.gov.au lists comparing with similar businesses, the net worth of business assets (including goodwill and brand recognition), and return on investment.
- Find buyers: brokers, your networks, staff, customers, online and traditional media.
- Negotiate. The information you give must be accurate; you must not mislead buyers. Agree the price, deposit (usually 10%), settlement period, handover and staff arrangements.
- Prepare the contract with a lawyer, including any restraint clause stopping you competing after the sale.
- Take care of your employees.
- Finalise your tax and legal obligations.
- Transfer the business to the new owner.
Protect confidential information. Use a confidentiality agreement with potential buyers, and follow privacy law when sharing information about employees, customers or suppliers.
Your employees
Talk to your employees about the sale at the right time. business.gov.au says that under the Fair Work Act, you must give employees written notice that their employment with you is ending, or pay instead of notice, including employees who transfer to the new owner. This guide doesn’t explain employment law. Check the Fair Work Ombudsman and get advice.
Get professional advice
Selling a business has tax, legal and financial consequences, including tax on the sale of assets and paying out employee entitlements. Talk to an accountant and lawyer early. A licensed financial adviser can help you plan what comes next. See Finding a mentor, coach or adviser.
Selling can be stressful. business.gov.au points to mental health support services if you need to talk to someone.
Common questions
When should I start planning to sell my business?
Early, ideally years before you want to leave. business.gov.au says not to leave succession planning to the last minute. A plan gives you time to improve records, reduce reliance on you, choose a successor and get a better price.
How is a small business valued for sale?
business.gov.au lists three common methods: comparing with similar businesses for sale or recently sold, calculating the net worth of business assets, and using return on investment based on net profit. A professional valuation gives you a more reliable figure.
Do I need a business broker to sell my business?
No, but brokers can help find buyers, advise on price and market trends, and manage the process. business.gov.au suggests checking their professional credentials. You should also use an accountant and a lawyer.
What happens to my employees when I sell the business?
It depends on whether the new owner offers them jobs. business.gov.au says that under the Fair Work Act you must give employees written notice that their employment with you is ending, or pay instead of notice, including employees who transfer to the new owner. Get advice on your obligations.