Selling a Business Checklist

01Preparation and Records

Buyers assess a business on what can be proved, so preparation starts with the records. Have your accountant bring the accounts up to date and reconcile them against lodgements and bank statements before anything is sent to a buyer. Documents commonly requested include:

• Profit and loss and balance sheets for recent financial years plus year-to-date.
• Business Activity Statement (BAS) lodgements and business tax returns for the same period.
• Current lease, any variations and correspondence with the landlord.
• Employee list with roles, employment type, start dates, pay rates and leave balances.
• Plant and equipment list with ownership, finance and service details.
• Supplier and customer contracts, and the franchise agreement if relevant.
• Licences, permits, council approvals and insurance policies with claims history.
• A clear schedule of what is included and excluded from the sale, including the business name, intellectual property, property, stock and other assets.

Requirements vary with the type of business, so this list is a general guide. The Queensland Government’s guidance on preparing to sell a business sets out the records and steps it recommends.

02Operational Readiness

A buyer will also look at how easily the business can continue without the current owner. Before listing, review practical issues that could reduce buyer confidence or create avoidable due diligence questions:

• Document key operating procedures, systems and recurring responsibilities that currently depend on the owner.
• Review customer concentration and any reliance on a small number of customers, suppliers or referral sources.
• Check important customer, supplier and service agreements for renewal dates, transferability and change-of-control provisions.
• Address obvious maintenance, technology, compliance or staffing issues where practical before the business is marketed.
• Prepare a clear summary of revenue streams, major expenses, debtors and material liabilities so buyers can understand how the business operates.

03Earnings and Adjustments

Buyers and their accountants will rebuild the profit figure on their own terms. Understand the earnings measure being used before a price is discussed. Owner’s earnings and EBITDA are not interchangeable, and adjustments can increase or reduce the reported profit. Review with your accountant:

• Owner remuneration and unpaid family work, adjusted for the realistic cost of the roles required.
• Personal expenses run through the business.
• Genuine non-recurring expenses, with records to support each one.
• Rent paid to a related party at a non-market rate.
• Interest and depreciation only where consistent with the earnings measure.

Where wages or rent are below market, the adjustment may reduce earnings rather than increase them. Prepare the supporting records before listing so each adjustment can be shown rather than asserted.

04Price and Appraisal

Set the asking price from verified earnings, the lease position and comparable sales rather than from what the business needs to return. A price that cannot be supported in due diligence tends to be renegotiated late, after time has passed and other buyers have moved on.

A free business appraisal from a broker gives an opinion of likely sale price based on the records you have prepared. A formal valuation is a separate exercise by a qualified valuer and may be needed for tax, finance or dispute purposes. Ask your accountant which you need.

05Lease Position

For a premises-dependent business, the lease affects both the value and the buyer’s ability to obtain finance. Review it with your solicitor before marketing:

• Remaining term plus option periods, and whether an option should be exercised before sale.
• Rent, outgoings and how rent reviews work.
• Permitted use, trading hours and any demolition or relocation clauses.
• The landlord’s consent process for assignment and any conditions the landlord may attach.
• Make-good obligations and the return of your bank guarantee or bond.

Queensland retail shop lease assignments can involve disclosure obligations on the outgoing tenant, with timing rules and exceptions. See the Queensland retail shop lease guidance and have your solicitor identify the steps that apply. Approach the landlord early rather than waiting for a contract to be signed.

06Stock, Plant and Equipment

Most sale prices exclude stock, which is usually purchased separately as stock at valuation (SAV) and counted on or just before settlement. Plant and equipment is usually included, so confirm what is being sold and who owns it. Before listing:

• Prepare an itemised equipment list that will become the contract schedule.
• Identify equipment under finance, lease or a supplier agreement, and whether it can transfer or must be paid out.
• Check the Personal Property Securities Register (PPSR) for registered security interests that will need to be released at settlement.
• Attend to overdue servicing, repairs and compliance items that a buyer’s inspection would raise.
• Clear damaged, expired or obsolete stock, which is normally excluded from the SAV count.

07Staff and Employment Obligations

A sale can trigger transfer-of-business rules. The treatment of prior service, leave, notice and other entitlements depends on the circumstances and the applicable law. See the Fair Work guidance on transfer of business and obtain employment advice before agreeing any price adjustment. Prepare:

• Employee list with role, employment type, award, start date and pay rate.
• Accrued annual leave, personal leave and long service leave balances.
• Employment contracts, awards and compliance, checked with an appropriately qualified employment adviser.
• A plan for when and how staff will be told, agreed with your broker, so the sale does not become public before you intend.

08Confidentiality and Marketing

To protect confidentiality, the business name and detailed financial information can be withheld until an enquiry has been qualified and an appropriate confidentiality agreement is in place. Your broker can manage staged disclosure and, where appropriate, ask buyers to demonstrate their capacity to proceed before meetings are arranged.

Your broker will prepare an information memorandum covering trading history, staff, lease and asking price. Review it carefully before it is released, since buyers build their due diligence questions from it. Inspections are arranged at times that do not disrupt staff or reveal the sale to customers and suppliers.

Take care when disclosing personal information about employees, customers or suppliers. Confirm with your solicitor or privacy adviser what can be shared, when it can be shared and whether information should be de-identified before disclosure.

09Tax and Structure

The tax outcome of a sale depends on the structure, the assets sold and your circumstances. The Australian Taxation Office sets out the small business CGT concessions and their eligibility conditions. Whether any concession applies, and how the sale should be structured, is a matter for your accountant before the business is listed rather than after a contract is signed.

GST treatment, including whether the sale may qualify as a going concern, also depends on the contract terms and should be confirmed with your accountant and solicitor.

Also ask your insurer whether any cover should continue after settlement, including whether run-off cover is appropriate for liabilities that could arise after the sale.

10Contract and Settlement Stages

Once a buyer makes an offer, the sale moves from marketing to paperwork and handover.

Offer and Contract

Have your solicitor review any offer, heads of agreement or contract before you sign. The name of a document does not establish whether it is binding. Confirm:

• Purchase price, with stock at valuation stated separately and capped.
• Deposit amount, stakeholder arrangements and the circumstances in which it may be refunded or forfeited.
• Conditions such as finance, due diligence, landlord consent and licence or franchise transfer, with their deadlines.
• Training and handover obligations, including duration and who will deliver them.
• Restraint of trade on you for a set period and radius, and whether it is workable.
• Included and excluded assets, business name, phone numbers, domains and social media accounts.

Due Diligence Period

Expect the buyer and their advisers to verify the financial, commercial and legal position within the contract period. Respond to requests promptly and through your broker, and keep the records consistent with what was provided in the information memorandum. Unexplained differences can lead to further questions, delays or attempts to renegotiate the deal.

Settlement and Handover

Your advisers should confirm the settlement requirements and adjustments under the contract. The checklist may include:

• Stocktake completed and SAV figure agreed.
• Landlord consent received and the lease assignment or new lease signed.
• Liquor licence transfer and any interim authority addressed with the relevant regulator and solicitor.
• Food business licence: in Queensland a council food licence does not transfer, so the buyer applies for a new licence in their name.
• Equipment finance paid out and PPSR releases provided.
• Utilities, payment terminal, insurance and supplier accounts transferred or closed.
• Keys, logins, customer records and training schedule handed over.
• Employee entitlements, final pays and any agreed adjustments settled as the contract requires.
• Business name, licences, permits and other registrations transferred, updated or cancelled as required.
• Final tax returns, BAS and other seller obligations diarised with your accountant, including any post-settlement actions.

Timeframes and requirements vary by business, council and landlord, so this list is a general guide.

11Prepare Before Listing

Work through the records, lease, equipment, staff and tax items with your advisers before the business goes to market. Buyers pay for what they can verify, and most delays trace back to something that could have been resolved earlier.

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For an opinion of likely sale price based on your records, request an appraisal from Bond Business Brokers.

12Common Questions

When should I tell my staff the business is for sale?

There is no single rule. Telling staff too early can unsettle the team, while leaving it too late can affect the handover. Agree the timing and message with your broker, and obtain employment advice on any obligations that apply to your employees.

Should I fix the lease before I list?

It is worth reviewing the lease before you list. A short remaining term or an unexercised option can affect a buyer’s assessment and finance position. Discuss the options with your solicitor and consider approaching the landlord before marketing.

What happens if the buyer’s finance falls through?

It depends on the contract. A finance condition normally sets out what the buyer must do, by when, and what happens to the deposit if finance is not approved. Have your solicitor explain the wording before you accept an offer.

This article provides general information only. Obtain advice from appropriately qualified advisers about your circumstances before entering into a transaction or relying on tax, legal or regulatory information.

Sources:

Selling your business (Business.gov.au)
Preparing to sell a business (Business Queensland)
Queensland retail shop lease guidance
Fair Work guidance on transfer of business
Small business CGT concessions (ATO)
Liquor licence transfer (Business Queensland)