New Venture Facilitation

aAgents.Biz facilitates finding venture funding, partners and support, etc.

Please contact us about your interest to partner and invest in new ventures, find partners and investors in new ventures on:

• Contact form
• Admin@aAgents.Biz
• +64 21 506660
• +61 2 9042 2671

aAgents.Biz can facilitate venture development, find partners and investors, etc.

Please contact us to talk about your venture development needs on:

• Contact form
• Admin@aAgents.Biz
• +64 21 506660
• +61 2 9042 2671

How to sell, why you’re selling, to who and for what price are key factors when selling a business.

1.0 SALE PRICE

The price a business sells for is what the Seller and Buyer agree to. Until then price can only be approximated based on expert opinions, in turn normally based on comparable sale prices, ROI – Return on Investment, Profitability, etc.

In New Zealand business brokers are licensed under rules requiring them to:

• Provide the Seller they act for with a realistic current market sale price appraisal, with a description of the method of appraising.
• Advertise an asking price that clearly reflects the Seller’s expectations

This is to ensure that there is clear communication between all parties (Seller, Broker, and Buyer) about the expected sale price. The appraisal is based on ROI (Return on Investment) from owning the business, based on the profits expected to be earned, for the Tangible and Intangible Assets excluding Stock. Prices are normally advertised as an asking price + stock.

Most SMB (Small and Medium sized Businesses) are Asset sales.

On the business assets sale agreement the total sale price is broken down into 3 parts – Tangible, Assets, Stock in Trade, and Intangible Assets.

• Tangible assets are the physical assets needed to operate the business e.g. premises, premises fittings, equipment (including machines and vehicles).

• Stock in Trade are the products (including the raw materials for making the products) sold by the business.

• Intangible assets represent the balance of the total sale price other than Tangible assets + Stock. That includes intellectual property, contractual rights, and goodwill. It is the agreed sale price difference (from Tangibles and Stock) for the prospects (opportunities and threats/risk) of the business to maintain, exceed, or reduce the profits and ROI of the business.

Business sales (in full or in part) can also be share (rather than asset) sales.

2.0 HOW TO SELL

2.1 IMPORTANT SELLING PRACTICES

Sooner or later the points listed below are included in what a buyer needs to know from a seller to make a buying decision & most (if not all) of them are needed by a business broker to appraise a market sale price and write an information memorandum or business profile.

Information should be provided to prospective buyers in stages.

Initially, an investment memorandum (business profile for smaller ‘selling a job’ businesses) should be provided, They should detail and/or summarize the information listed below.

More detailed information (e.g. financial statements) should only be provided after serious interest is indicated from someone the Seller will sell to, some information only provided at DUE DILIGENCE stage when a conditional offer to buy the business has been agreed to.

1. Indicate a sellable or near sellable asking price.

2. Provide consistent facts about what’s for sale.

• A list of assets with asking prices
• A summary of historical financials, including working capital needed for receivables minus creditors, financial performance based on the Financial Statements and GST returns
• Financial Statements and GST returns
• A copy of contracts needed for continuing the current going concern business, including leases and employment agreements

3. Provide a strategic outline of the prospects for future ROI.

• Provide a reason for selling
• Describe the current and future situation’s effect on ROI – from the business assets and operations, including about the business premises, processes, and staff, plant and equipment, products and services, suppliers, competitors
• Provide a strategic SWOT (Strengths, Weaknesses, Opportunites, and Threats) Analysis

4. Continue operating the business as usual, in good repair, for continued performance and best future prosperity.

5. Propose an appropriate handover and training period.

6. Propose an appropriate non-compete period.

2.2 APPOINT A BUSINESS BROKER TO SELL

Selling a business is a specialist area so it’s worth getting expert help.

A good business broker should understand how to describe the strategic, management and financial situation affecting ROI that a buyer needs to know to make a buying decision and be licensed to draft an AGREEMENT FOR SALE AND PURCHASE OF A BUSINESS.

Experts specializing only in business strategy and management, or finance and accounting, or law are worth getting help from too.

Help from a lawyer licensed to practice law and give legal advice should be sought before signing a sale agreement. A business broker’s license does not license them to give ‘legal advice’.

It’s worth getting a broker to appraise a current market sale price.

It’s worth getting a business broker to prepare an investment memorandum (business profile for small businesses) with details about your business, that outline what buyers need to know to make their buying decision. The information should be big on facts and forecast opportunities and risks for growing the business.

3.0 Who to Sell to

Buyers may be:

• employees — this is known as a management buyout
• competitors
• suppliers or customers
• entrepreneurs
• investment groups.

Finding and negotiating with potential buyers is time-consuming and specialist work, so think about hiring a business broker to do it for you. A broker will know which type of buyer will be interested in your business and how to approach them. 

How to sell, why you’re selling, to who and for what price are key factors when selling a business.

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