In an ideal world, you would be selling your business quickly and for a profit. But as well all know, this isn’t always the case. There are a large number of things that can get in the way of a smooth sale. To help you when your selling your business, we’ve composed a helpful list of legal tips to get your business sold.
To get the best best price for your business, you need to be prepared. By leaving it too late you could find yourself in a hurry to get it all over and done with. Don’t settle for a lower price in the interest of a quick turnaround.
Make sure your Franchisor is onboard
Your Franchisor has the right to veto a new purchaser, if they feel that they don’t have the right experience or financial skills to run the franchise. By getting your Franchisor onboard with the decision, you’re avoiding any issues if they don’t approve of the purchaser.
Has your Franchisor been offered the business back? In some networks, you are required to offer the business to the franchisor first before offering it to a third party. If the franchisor does not wish to buy back the business and you have found a suitable purchaser, you may be required to pay a transfer or assignment fee under your franchise agreement. Make sure that you’ve checked this before you make any other moves.
Get the details sorted
Make sure you read and understand the transfer clauses within your franchise agreement and have financials and other documentations ready. Are your lease term, lease assignment provisions and landlord going to affect your ability to sell your business? Is your business running as efficiently as possible? All of these will impact a potential franchisees decision to purchase your business.
Plan your exit strategy
If your business is unprofitable, if the franchise network is under-performing or there is a lack of support from your Franchisor – you may need to think about a realistic exit strategy. Focus on any issues that may lessen the value of your business. You could upgrade technology and record keeping systems which increase the efficiency of your business. Another option is to assist compliance with your franchise agreement and fair work requirements.
Get the price right
Have realistic expectation of the value of the business. Potential buyers will often ask how you arrive at the asking price. Have a valuation rationale for your business to justify the purchase price.
Be upfront and honest
It can be tempting to gloss over certain details regarding your business, either about turnover, customer traffic, franchisor support or training. It’s in your best interest to be completely transparent about your business or its potential earnings to a purchaser. You may unknowingly be engaging in misleading or deceptive conduct.
Get out clean
First, check the restraint provisions and ensure that you will not be in breach of any ongoing obligations once you sell the business. Once the purchase of your business is secure, make sure that you are released from all guarantees and obligations under the franchise agreement and all other contracts.