Use the following guidelines to establish a fair market value for the business:

• Prepare a realistic balance sheet and income statement for at least the past three years of the business.  If possible, have them signed off by a reputable accounting firm.
  
• Have your business valued by at least two experienced independent business valuators.
  
• Consult business realtors to find out if any similar businesses to yours have been sold or are up for sale and find out the price. ask them to value your business.
  
• Remember not all businesses are the same and it is very difficult to draw exact comparisons between them.  However, the above will provide a very clear indication of what your business could be worth.
  
• With this information determine in your mind  what would be a fair market price for your business.
  
• Be realistic in setting your asking price. Setting the asking price too high can protract the selling process unnecessarily as buyers also have a clear understanding of what they are prepared to pay.
  
• You must get a clear understanding of the tax implications of selling the business especially capital gains tax.

Inform your Staff

• Staff are often the biggest asset of a company, and it may be very important to you to be able to sell your business with the current staff
  
• Inform your staff of your intentions and give them the assurance that you will negotiate the best deal for them
  
• Not informing your staff may lead to members making incorrect assumptions and this could in turn affect the working morele of the staff

Appointing a Business Realtor

• Deal with a reputable businessperson or company. All too often what should have been a straightforward business sale turns out to be a very unhappy experience through dealing with unprofessional realtors.  Make inquiries and get references on recent sales.
  
• Check to see that the realtor's commission for the service they provide is in line with the market.  The commission for the service they provide is in line with the market. The commission you pay on the sale of a business can be quite considerable therefore the service you recieve should be very professional and impartial towards the seller and the buyer.
  
• Pitfalls of selling up the market or selling at too high a price:
  
  *  Selling up the market - Realtors who try to force the market
      up further in an up cycle.
  *  The sellers starting price is too high - All too often a realtor
      will agree to market a property even if the asking price is too high.
      They will do this to humour the seller just to get the business.
  
  
• The outcome of these practices is often a business that does not sell, or if a buyer is foolish enough to make an offer, the finance eventually falls through.
  
• Selling to low a price often means that the seller did not do a thorough enough investigation to establish the true market value.  A sale is often made all to quickly in these instances.

Information

• This information is vital and will not only help in affirming the potential value of the business, but should be provided to the potential buyer.
  
• When requested, provide potential buyers with as much information as possible:
  
  *  Balance Sheet and Income Statements past 3-5 years
  *  Business cashflow information
  *  Discuss the staff employed in your business. Point out the key
      staff members and find out what the buyer's intentions are so
      that you can be well prepared in any event
  *  Information on debtors and creditors
  *  Production processes
  *  Trade practices etc.
  

Good information about the business will help motivate the buyer's purchasing decision and assist the buyer in raising finance.

Financing a Transaction

• A good rule to follow is to avoid being a bank for someone else's purchase. If a person wants to negotiate a financing agreement without involving a bank it could be a good indication that the potential buyer cannot afford the asking price
  
• However, there are instances where these types of transactions can work, but exercise extreme caution and any verbal agreement must be put in writing and any sale contracts should be given to an attorney for their views for your protection
  
• The safest route to follow is for the buyer to arrange his finace through one of the commercial banks
  

Negotiating the Asking Price

• If the buyer's first offer is much more than 20% lower than the initial asking price then either the buyer is taking  a chance or the initial asking price was too high.  In many instances it's up to the seller to negotiate the best possible deal
  
• The seller should try and get at least two offers made on the business to understand what the market is saying about his asking price
  
• If unsure the seller must make best use of the businesses contacts, accountant, family and friends to discuss the buyer's offer
  

The Sale Agreement

• Reputable realtors have a standard sale agreement, which can be used
  
• Alternatively a standard agreement can be purchased form stationary suppliers
  
• However, if you are in any way unsure, engage the services of an attorney to assess the contact and the terms and conditions of the sale before signing it
  

The Transfer of the Property

• The seller appoints the attorneys for the registration and the transfer of the property
  
• On instruction, the attorney will calculate the Capital Gains Tax implications of selling the business for the seller
  
• If the business is registered for VAT then the buyer will need to pay VAT, which can be claimed back