Step-by-step guide to selling a business in New Zealand

One of the most important things you will ever do is sell your business. It’s the result of years of hard work, passion, and giving up things. For many Kiwi business owners, it marks a big change in their lives, opening up new doors or giving them a well-deserved break. But there are a lot of financial, legal, and operational problems that can get in the way of a successful sale.

Knowing how to sell a business in NZ involves much more than just finding a buyer and agreeing on a price. To make a deal work, you need to plan carefully, get professional help, and know the market inside and out. If you don’t get ready properly, you could lose money, get into legal trouble, or even see a good deal fall through at the last minute.

This guide gives you a full, step-by-step look at the process. We’ll help you with everything from figuring out how much your business is worth to dealing with the last legal issues, making sure you’re ready to get the best possible result. Following these steps will help you get the most money for your sale, keep your interests safe, and make sure that everyone has a smooth transition.

Step 1: Find out how much your business is worth (business valuation)

Before you can even think about listing your business, you need a clear and objective answer to the question: “How much is my business worth?” Your whole sales plan is based on a precise business valuation. It helps you set realistic goals, figure out how much to ask for, and gives you a strong base for negotiations.

Common Ways to Value a Business

There are a number of ways to figure out how much a business is worth, and each one has its own pros and cons. A mix of methods usually gives the most accurate picture.

Earnings Multiples: This is a common way to figure out how much a small to medium-sized business in New Zealand is worth. You use a “multiple” on your business’s earnings to do this. EBIT (Earnings Before Interest and Tax) or EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) are the most common ways to figure out how much money a company makes. The multiple itself changes a lot depending on the industry, the size of the business, its growth potential, and the state of the market. A stable manufacturing business might have a multiple of 3–4 times EBIT, but a tech company that is growing quickly could have a much higher multiple.
The DCF method values a business based on how much cash it is expected to make in the future. It predicts how much money the business will make over a certain amount of time (usually 5 to 10 years) and then “discounts” those future earnings to their present-day value. This method is harder, but people like it a lot because it looks at the future potential of the property, which is what a buyer is really buying.
Valuation Based on Assets: This method figures out how much the company’s assets are worth (like equipment, inventory, and property) and then subtracts its debts. This method is often used for businesses that aren’t making money or are going out of business because it sets a “floor” price.

What a Professional Valuation Does

Online calculators can give you a rough idea of how much something is worth, but a formal valuation from a qualified professional, like a business broker or a chartered accountant, is worth its weight in gold. A professional adds objectivity, market knowledge, and experience to the process. They will look at your financial records, compare your business to other recent sales that are similar, and give you a full report that you can confidently show to potential buyers. This independent evaluation is very important in negotiations and shows buyers that you’ve done your research.

Step 2: Get Your Business Ready to Sell

Getting your business “sale-ready” is the next step after you know how much it’s worth. This means putting your records in order, making your operations run more smoothly, and showing the business in the best light possible. A business that is well-prepared not only gets more customers, but it can also cut down on the due diligence period by a lot.

Important Papers and Files

Put together and organise all the important papers. Buyers and their advisors will want to see:

Statements of Financial Condition: At least three years’ worth of detailed balance sheets, cash flow statements, and profit and loss statements. A qualified accountant should do these. Tax Returns: You need to send in the same tax returns for the same time period to check your financial statements.
Legal Documents: This includes your business’s lease agreements, constitution, certificate of incorporation, key customer contracts, supplier agreements, and any contracts with employees.
Asset List: A full list of all the physical assets that are for sale, like cars, tools, and stock, along with their estimated value.
Intellectual Property: Paperwork for any copyrights, patents, or trademarks that the business owns.

Cleaning Up the Operations and Books

In addition to filling out paperwork, do everything you can to make your business as appealing as possible:

Fix any problems that are still there: Settle any legal problems, pay your taxes, and take care of any big complaints from customers or employees.
Increase Short-Term Profitability: In the months before the sale, try to find ways to make more money or cut costs. But don’t make big changes that might look like they won’t last to a buyer.
Write down how you do things: Write down standard operating procedures (SOPs) for the most important parts of your business. This shows that the business can run smoothly without you being there every day, which is a big selling point.

Step 3: Hire a group of experts

You can’t sell a business by yourself. One of the best things you can do is put together a team of experienced advisors. They will help you understand the complicated parts of the sale, look out for your best interests, and help you avoid making expensive mistakes.

Your Professional Advice Team

Business Broker: A business broker’s job is to sell businesses. They can help with pricing, making marketing materials, finding and screening potential buyers in private, and making negotiations easier. Their connections and experience in the industry are very useful.
Lawyer: A lawyer with experience in commercial transactions is essential. They will write and check all legal papers, such as the sale and purchase agreement, tell you what your legal duties are, and make sure the deal follows New Zealand law.
Accountant: Your accountant will play a crucial role in preparing financial statements and advising on the tax implications of the sale. It’s very important to know what the tax is on selling a business in New Zealand. For instance, they can advise on the tax on goodwill and whether commission on the sale of a business is deductible.

When you hire professionals, you can be sure that each step of the process is done right. This lets you run your business until the day it sells.

Step 4: Get the word out about your business to people who might want to buy it.

With your valuation set and your business prepared, it’s time to find the right buyer. To get qualified buyers without scaring your employees, customers, or competitors, you need to be careful and skilled when you market your business.

Making the Information Memorandum (IM)

The Information Memorandum (or Sale Memorandum) is the most important part of your marketing plan. This is a full document that gives potential buyers a clear picture of your business. It usually has:

A summary for executives
The history and background of the company
Products or services offered
Analysis of the market and competitors
An overview of operations
Summaries of finances
Opportunities for growth
The price and terms of the deal

Secret Marketing Plans

Keeping things private is very important. You don’t want people to find out too soon that your business is for sale. A business broker can sell your business without letting anyone know who it is until a potential buyer has been checked out and signed a Non-Disclosure Agreement (NDA). Some ways to market are:

Business on the Internet For Sale Web pages: Putting your business on specialised sites.
Broker Networks: Your broker will have a list of qualified buyers who are looking for opportunities right now.
Targeted Outreach: Going after strategic buyers in your industry on purpose.

Step 5: Negotiate Offers and Agree on Terms

The negotiation phase begins when you start getting offers. An offer is more than just a price; it also includes a number of terms and conditions that will affect the final deal.

Getting the Offer

A typical offer will include:

The Purchase Price is the full amount the buyer is willing to pay.
The structure of the deal: How the price will be paid, such as all cash at closing, seller financing, or an earn-out provision that ties part of the price to how well the business does in the future.
Conditions: Clauses that must be met for the deal to proceed, such as securing financing, completing due diligence, and obtaining landlord approval for a lease transfer.
Proposed Closing Date: The date by which the sale should be finished.

Carefully review every aspect of the offer with your lawyer and accountant. If the price is higher but comes with risky conditions or a bad payment plan, it might not be as appealing.

Step 6: Go through the due diligence process

The buyer will start their due diligence after you accept a conditional offer. This is a thorough check of your business to make sure that all the information you’ve given is correct. It’s usually the most stressful part of selling something.

What buyers want

The buyer and their advisors will carefully look at every part of your business during due diligence, such as:

Financials: They will go through your financial records in great detail, comparing bank statements, tax returns, and internal reports.
Legal: They will look over all contracts, leases, permits, and licenses to find any possible legal problems or risks.
Operations: They will want to know how the business works on a daily basis, such as your supply chain, customer base, and employee structure.

The best way to make sure the due diligence process goes smoothly is to be fully prepared, as Step 2 says. To gain the buyer’s trust, respond quickly and honestly to their requests.

Step 7: Finish the sale and move on

You move on to the last step, closing the sale, once due diligence is done and all the conditions have been met.

The Agreement to Buy and Sell

Your lawyers will finish the Sale and Purchase Agreement (SPA). This contract is legally binding and spells out every part of the deal, such as the final price, payment terms, warranties, and what the seller has to do after the sale. Please take the time to read this document carefully before signing.

Making the Deal

The buyer officially takes over the business on the last day of the sale. Money is exchanged, and all the necessary legal papers are signed and carried out.

Change After the Sale

Your job may not be done when the sale is over. A lot of contracts have a transition period where you agree to stay on for a set amount of time (like one to three months) to help train the new owner and make sure that customers and employees have a smooth transition. This is very important for keeping the goodwill you’ve built and making sure the business keeps doing well.

This is where your next chapter begins.

Selling a business in New Zealand takes a long time, not a short time. You need to be patient, ready, and get expert advice at every stage, from the first valuation to the last handshake. You can confidently go through the process, get a fair price for your hard-earned asset, and move on to your next adventure, knowing that your business is in good hands.

The journey can be hard, but the reward—seeing your legacy live on while you make money—is well worth it.

If you want to make sure you get the best possible outcome when you sell your business, getting professional advice is the best thing you can do. The people at Business Kiwi know how to help you with every step of the way. Get in touch with us to talk about how we can help you reach your goals in private.

The right way to Selling a Business in New Zealand