7 STEP GUIDE

ALLBIZ DEAL ROOM 7 STEP GUIDE TO SELLING YOUR BUSINESS 20% 60% Industry average closing rates Our average closing rates

ALLBIZ DEAL ROOM In 2018, Mark Bouris and Channel 7 premiered \"The Mentor.\" In a digital sense, it was a huge success, generating over 6,000 About Our requests for business consultations in a matter of weeks which Company led to a partnership between Mark Bouris (YBR) and Matt Holland (Ray White Business Sales) to launch Mentored Business Sales & Services trading as the \"allbiz deal room\". Since launching in 2018, the business has grown to over six business sales platforms promoting all types of commercial transactions. Without a doubt our business sales marketplace and deal rooms are quickly becoming the market-leading platforms in Australia for any commercial asset sale or investment. By integrating technology and best business practises, we were able to increase closing rates from the industry average of less than 20% to more than 60% using our unique process.

ALLBIZ DEAL ROOM 7 Step Guide to Selling Your Business Selling your business can be complicated, confusing and often quite an emotional process for business owners. To help make sense of it all, we've prepared this short 7 step guide, including many useful tips about how to sell your business. From preparing your business through to marketing and negotiating with prospective buyers, this guide will help demystify the process and put you in a better position to sell your business. Disclaimer: This guide is not intended to be a comprehensive in nature but rather a high level summary of the steps in selling a business. We recommend seeking advice from a qualified professional before making any decisions regarding the sale of your business.

ALLBIZ DEAL ROOM We look At In this guide we will take you through the following steps which are typical for good results in most business sales: Getting Ready For A Sale Valuation Information Memorandum Finding Buyers (Marketing Your Sale) Dealing With Buyers Negotiating Your Deal Sale & Handover You should also consider It's important to understand that the end to end process of a business sale can be quite complex. The information presented in this guide relates only to certain parts of the sale process. It does not for example look in detail at: 1. Preparing your business financial statements - you may need to consult with you accountant. 2. Getting your personal finances sorted - you may need to talk to your financial advisor or wealth planner 3. Preparing sales contracts and other legal requirements - you may need to consult with your solicitor.

Step 1. Getting Ready For a Sale ALLBIZ DEAL ROOM 1. Clear objectives and goals 3. Systemise Whether you’re a sole director, a family business, or a A well structured and systemised business will always be team of unrelated partners – the important thing is to more attractive to potential buyers. be clear about each shareholder’s objectives including Be sure that you can show that you have systems and their financial outcomes, intentions to stay in or leave processes in place that will allow the business to run the business, preferred exit timings, and desires for smoothly without the owner. These should be documented the future of the business. in a way that can be presented to prospective buyers. 4. Build your team 2. Gather all your information You will need a strong team behind you to ensure you get the best sales outcome. Your team should consist an When you first consider selling your business, you accountant or bookkeeper, solicitor, a trusted business need to go through the process of organising all your preparation / sales professional. paperwork. Before you approach your accountant or Be sure to factor in all your costs of selling as part of your other advisors, you need to have your paperwork preparation. This will ensure you understand how much such as; all of your financials, equipment, lease funds you might expect to walk away with on completion of agreements, contracts, client, distributor, supplier the sale. lists, and more ready to go.

ALLBIZ DEAL ROOM Step 2. Valuation 1. Get an Appraisal One of the most important decisions to be made when it comes to selling a business is how much to sell the business for. It's important that an owner not ask for more than the business is worth or it may never sell but likewise, the owner shouldn't sell for less than the value of the business or they will miss out on valuable funds. This is why it is very important to seek valuation guidance from advisors such as your accountant or other business sales expert, and to compare these against your own estimates so as to get an understanding of the market rates and what can be done to improve the final outcome. It’s also important to understand the difference between an appraisal and a valuation. A valuation can only be performed by a licensed business valuer and usually costs $3,000+. Valuations are typically used for: Sales and Acquisitions Banks and financial institutions to obtain loans. Disputes and resolutions with partners and company directors. Family Law Legal Disputes Stamp duty calculations and capital gains liabilities Government Authority requirements Disputes in the dissolution of the partnerships For the purpose of selling a small business, an appraisal is usually all that is needed. This is an estimate of what it is believed the business could sell for in the market.

ALLBIZ DEAL ROOM Step 2. Valuation Continued 2. Understand methodology for appraising value While there are numerous ways to value a business, the most common method is the multiples method . This method requires you to use your latest \"adjusted\" profits (or revenue in some cases) and multiplying it by a \"multiple\" which reflects the risk associated with your business and/or industry. Note this is not an exact science and in most cases the result may be a \"value estimate range\" rather than exact number. Estimate Value = Adjusted Profit X Multiple Adjusting profits is a process of adding back certain expenses, which are not likely to be applicable to the new owner, to the reported profits of the business. This might include items such as depreciation, owners' wages and superannuation, interest on loans, personal education expenses, sponsorships etc. The multiplier is typically a number or range within which businesses in a particular industry tend to sell (i.e. market range). The industry range can often be quite large (e.g. 2 - 6 times) so the multiple for a particular business is usually calculated by using the industry range as a starting point and then factoring in a range of \"risk\" factors such as company size, years in operation, tangible & intangible assets, dependency on owner, customer base and spread of customers...just to name a few. It stands to reason that the more you can \"de-risk\" your business in the eyes of a buyer, the greater the multiple applied and the higher the value. On the next page we'll demonstrate an example of an appraisal.

Step 2. Valuation Example ALLBIZ DEAL ROOM Adjusted Profit Addbacks & Adjustments = $180,000 Reported Profit = $65,000 + Depreciation = $25,000 + Owners' Wages = $60,000 + Interest & Tax = $30,000 Estimated Appraisal Multiplier = 2.5 Value = $450,000 ($180,000 X 2.5)

Step 2. Checklist Checklist to maximise your Prepare your business accounts for a minimum of 3 years (actual and normalised business value /adjusted versions) Accounts prepared by your accountant or specialist will carry ALLBIZ DEAL ROOM far more weight than those prepared by in-house accountants. Collect and prepare ALL of your associated business documents for due diligence. Create a professional sales memorandum outlining everything about the business or deal on offer, point out the pro's and con's, sell the deal... Reduce stock value where possible and remove dead stock. In most cases, the higher the stock value, the lower the multiple. Ensure you have supplier agreements that can be transferred on the same or similar terms. Where a customer represents more than 10%, consider a formal agreement or prepare a strong reply to the buyer; this is seen as a weakness and may reduce the value of the deal. Where a lease is important to the business, ensure you sign a new lease and try to have any clauses removed that might prohibit an assignment of the lease, such as demolition clauses. Itemise your assets and inclusions to avoid disputes and remove any assets not included by either noting them on the agreement or removing them completely from the premises, as this often causes disputes. Will vehicles and other business assets, including finance agreements, be paid out or included for takeover? Who will pay the staff entitlements, what are they, and will key staff remain?

ALLBIZ DEAL ROOM Step 2. Information Memorandum What is it and why is it important. The Information Memorandum or IM, is perhaps the most important document that you write for your business. It's usually 15 - 30 pages and contains critical information about the business structured in a way that is easy to follow. It is used to present to potential buyers, who will in turn share it with their own advisors. A well presented IM is an invaluable tool for selling a business. It will help the buyer to understand your business, increase the attractiveness of the business and help improve the likelihood of a sale and a better price. A good IM will give potential buyers enough information to assess if this is the business for them. Typical IM contents might include: Disclaimer Conditions of acceptance regarding the offer Executive summary Product, sales and pricing Specific trends Suppliers Advertising and sales Real Estate Fixtures, fittings and software Training and introduction Guarantees Financial highlights Employees & wages Skills required and licenses Current issues Strengths and potential improvements of business Reason for selling Sale price and summary of investment consideration Documents available for review

ALLBIZ DEAL ROOM Step 4.Finding Buyers - Marketing 1. Purpose When it comes to marketing your business, it's important to remember that the aim of marketing is not to sell your business, but rather to attract as many potential genuine buyers as possible wanting to conduct a closer inspection of the business. 2. Channels It's important when deciding on where to market that you understand where your potential buyers are likely to be. Creating a marketing plan which includes both passive and active marketing will yield the best results. Passive marketing includes a range of advertising mediums from online platforms to social media and newspapers whereas active marketing is a more targeted approach and involves reaching out to specific targeted businesses or individuals that may be interested in your business for a variety of reasons. When developing your marketing plan, it's important to focus on marketing value (reach) rather than cost. One medium might cost you $800 and deliver 10 leads whereas another might only cost $200 but only deliver 1 lead. Clearly the first option is the better in terms of value. Effective Marketing can be difficult to achieve alone and can often result in costly errors so always consider talking to experts in the field of business sales for advice.

Step 4.Buyers - Marketing Process ALLBIZ DEAL ROOM 01 02 03 04 Marketing Prepare Copy Sale analysis budgets writing execution Research all the Using the information Once you've decided Once your ads and options for advertising collected in section 1, where to market, you'll plans are ready to go your business and prepare a budget need to prepare eye- it's then a matter of determine which is the which reflects your catching and engaging running the ads, most appropriate and expectations for advertising - letters, sending letters and likely to yield the best generating leads scripts and other ad making any direct calls results i.e. give you sufficient to result in a content. per your plan. maximum reach. sale. .

Step 5. Dealing With Buyers ALLBIZ DEAL ROOM 1. Introducing buyers to your business This is where you begin to deal with people responding to your marketing. It is when you have your chance to sell your business to potential buyers. If you have done all the preparation work we talked about above then this should be a relatively easy process. 2. Typical process for dealing with buyers Initial Confidentiality Information Clarification Questions Enquiry Agreement (CA) Memorandum (IM) & Business Inspection Answering brief You would normally Once you receive the If the buyer is questions. ask the buyer to signed CA you can share interested in pursing a enter into a CA to purchase they may have Generally not too ensure all the the IM. This should specific, just enough to provide most of the some additional information shared information any buyer questions and/or may help the buyer remains would need to make a arrange an inspection understand whether more informed decision this is a business they confidential. about whether to make of the business. might be interested in an offer. buying.

ALLBIZ DEAL ROOM Step 5. Dealing With Buyers Conduct during the enquiry process Your conduct during the enquiry phase is extremely important to a achieving a sale. It's important to be open, honest and helpful during this process so as not to put potential buyers off. You should: 1.Seek to build rapport with the buyer 2.Allow the buyer to lead the conversations and ask as many questions as they like 3.Answer all questions honestly 4.Don't expect to sell the business after an initial meeting...there will be more questions 5.Make yourself available at all times AND MOST IMPORTANTLY..... 1.Transparency - don't try an hide anything. Always be open and honest 2.Timing - keep the momentum going with quick responses and follow ups 3.Be prepared - see the section below regarding the top things buyers will be asking

Top 20 Questions a Buyer Will Ask Let's take a look at this from the buyer's or investor's point of view. 20 1.Why is the current owner looking to sell the business? 2.What kind of growth potential does this business have? TIPS 3.Is the business in good financial standing or are sales or profits in decline? ALLBIZ DEAL ROOM 4.Can I do this, will they help train me or run after settlement? 5.Has the seller provided the most recent financial records? 6.Examine the bank statements carefully to ensure they match the the sales records. 7.Review the tax returns for at least three years, preferably five. 8.Review all copies of all current contracts for the business, including leases, supply agreements, and customer agreements. 9.Is the business or has it ever been, the subject of an investigation by a government agency? If so, what is the current status. 10.Have they been paying employee benefits? And who will be held accountable in the future? 11.Is the company currently in a lawsuit, or has it ever been, and what is the status? 12.Is the company encumbered by any debts or liens? If so, what are they for, and how many of them are there? 13.What about the key competitors and suppliers? Who are they and where do they pose a risk. 14.Will key staff remain and will management remain if i'm investing vs. actively buying to work? 15.Payments, how are payments made? What does the debtors' list look like. 16.How much does the company write off for bad debts each year? 17.How many active clients does the company have and how many total. 18.Customers, What is a typical customer, where are they, and is it a community or a special arrangement that may or may not apply to me? 19.Is there a seasonal variation in the trading and stock requirements? 20.Is there a single customer who accounts for a significant portion of the sales volume? If this is the case, will the company be able to survive without this customer?

ALLBIZ DEAL ROOM Step 6. Negotiations 1.Initial offer If your buyer has reviewed your IM and is satisfied with all the information given in the enquiry phase, they may make an initial offer. If so, make sure that is in writing and structured to clearly articulate terms and what's including or not. Please seek professional advice if you're unsure as to how this should be structured. If you've taken all the right steps to this point, it is possible that the initial offer matches your asking price...however quite often you will need to negotiate. 2.Negotiation Remember, negotiation is not about price haggling. It should be about discussing value and understanding each others' position to arrive at a price and terms acceptable to both parties. Some handy tips when negotiating - prepare a list of concessions and incentives in advance; don't be too greedy; conduct yourself in a friendly manner; avoid arguing over positions; don't try to bluff the buyer; try to negotiate with multiple buyers at once if possible; understand what value looks like for the buyer or what might present issues for the buyer (ask questions...consider things like handover training time, settlement time, lease transfers, managing your liabilities etc.). 3.Accepting an Offer & Due Diligence (DD) Once negotiations reach a mutually acceptable stage, you should look to formally accept the offer. Doing so allows you to negotiate exclusively with a buyer for a defined period while undertaking a DD. This should again be in writing (\"Acceptance of Offer Letter\") and should include details of the buyer and seller, price and terms agreed, details of the deposit (generally 10%), details of the exclusive negotiation time period, and details relating to settlement terms. Once the exclusive negotiation period is agreed and the deposit paid, you are ready to open your books and records to the buyer to conduct their DD. The DD is essentially a deep dive into your business and can be very comprehensive. At this stage it is also a good idea to share a draft contract of sale agreement for review by the buyer's solicitor.

ALLBIZ DEAL ROOM 1.Contract of Sale Once the Due Diligence is complete it's time to execute the formal contract of sale. Business sale contracts can be very complicated and it is important to have input from a solicitor or other legal professional in drafting, negotiating and executing the contract for sale. 2. Settlement & Handover Your sale contract will reflect the agreed settlement terms and timing. Settlement refers to the point when the seller receives the money and buyer takes ownership of the business. This usually occurs within 4 - 6 weeks of contract execution but can vary by business depending on the complexity of the business, the needs of the buyer and what the seller is prepared and able to provide (i.e. what was negotiated). Be prepared to be flexible when agreeing to the settlement period as buyers will often pay more for a business in which the owner is prepared to stay in longer. The handover process can typically be broken down to 4 stages: 1.Giving the buyer a general overview of how the business operates. This is usually in the form of the buyer shadowing the owner for a specific period of time to see what they do and how they operate. 2.Training - this is the formal teaching process. Showing the buyer how to run the business, use the systems, sell to clients and any other formal processes within the business. 3.On site handover is the point at which the buyer begins to run the business and the seller is there shadowing the buyer to ensure there are no issues and providing clarification / direction as required. 4.Final support - this occurs when the buyer has completely taken over the running of the business and the buyer is available if and as needed to answer specific queries or provide guidance on particular matters. Final note - be sure that you fulfil all your legal & regulatory requirements between the sale contract and settlement. Your solicitor should be able assist you to ensure this is done.

Business A: Level 9, 440 Collins Street, Melbourne VIC 3000 E: [email protected] W: www.vic-business.allbizdealroom.com PH: +61 3 0468 517 930 THINKING ABOUT PUTTING YOUR BUSINESS ON THE MARKET? I'll prepare your deal for success Working with experts in the field can often make a huge difference to your final results...so why not give us a call to discuss how we can help with selling your business at a fraction of the cost of using a Broker! Call: Santo Zurzolo Director Business & Corporate Listings Victoria