What does your organic supermarket need to consider before selling?

The sale of organic produce is a growing commercial market, so if you’re ready to sell your organic supermarket, you should have good bargaining power and a selection of potential purchasers in the current economic climate. Ensure your prospective buyer can secure the finance to purchase your business, assess the experience they have in running a business, and find out their future business plans. You should be prepared as part of the sale of business agreement to sign a restraint of trade clause, which is usual to expect and will prevent you from starting up a competing business reasonably nearby, within a reasonable amount of time.

Assets:

Consider your business’ cash assets: credits, debts, and documentation of predicted future cash-flow. Keep your accounting records up to date, as clear and concise financial and legal records appear credible and attract potential buyers.

Create a list of equipment and property owned by your business. Include land and/or shop fit out, delivery vans and/or other vehicles, refrigerators and freezers, cashiers, computer systems and point of sale systems, credit card facilities, storage containers etcetera. These should be properly maintained and regularly valued for insurance reasons; include current market value. Attach the records relating to maintenance, insurance, repairs, and cleaning.

Make an inventory of your current organic produce stock both in storage and on shelves. Guaranteed organic produce is necessary, an organic produce certificate must be held by your suppliers.

Social media:

Social media accounts will need to be sold with the business, along with the business domain name. A social media account with many followers is extremely valuable to a business and its goodwill, and should be given value in the sale of business. Different types of social media require have different transfer requirements:

Facebook: you must obtain prior written permission from Facebook if you wish to transfer your account. You must not share your password or let anyone else access your account, or transfer any of your rights or obligations under the Facebook statement to anyone else without Facebook’s permission.

LinkedIn: a LinkedIn Group account may only be transferred with written approval from LinkedIn at its sole discretion.

Instagram: handing over the account is quite easy – just give the purchaser your login credentials. You will likely need to hand over email account associated with the account to protect the purchaser from potential account recovery attempts.

Intellectual property:

As confidential information, your contact list (include both sellers and customers), and product list are business assets that will transfer with the sale, and also hold copyright protection. It is a good idea to notify present clients of your intent to sell the business so that they understand they will be receiving newsletters and other promotional material from a different proprietor, and can opt-out if they want to.

Trademarks, the name of your business, and copyright such as campaigns and slogan designs, packaging design, and your website design will also need to be included in the sale. Copyright will protect any organic food products that you may have personally created, and you may wish to include recipes as part of the sale agreement. These trade secrets hold value and add to the overall worth of your business.

Confidentiality agreement:

Make sure prospective buyers sign a confidentiality agreement prior to disclosing any confidential information to them about your business. This agreement protects you from potential purchasers using information gained during inspection of your business and business profile against you in competition, and gives you enforceable rights against them if they do. It also prevents them from poaching your employees, customers or other business contacts, and allows you to legally seek compensation if they breach the agreement.

Employees:

Employees may either be transferred with the business to the new owner, or end their employment with the business upon the usual notice provisions in the employment agreement. You may leave this option up to the purchaser, however staff who are personally invested and motivated can increase the sale value of your business and the purchaser would be wise to try to keep current staff if that is the case.

Further legal requirements:

As well as the sale of business agreement, you will need to sign a Food Act transfer inspection consent form and allow for inspection of food safety standards at your business premises before transfer of business can take place. The purchaser should pay any associated fees. You may also need to complete a Vendor’s Statement or Section 52 Statement before the contract is signed. This document includes important financial and tax information about your business that is necessary for the purchaser’s due diligence.

Other documents to prepare and make available for the sale:
Business name registration certificate (you will need to formally transfer the business name through ASIC at time of sale);
ABN registration;
ACN registration;
GST registration;
Insurance papers;
Lease papers;
Market evaluation of the business;
Buy-sell agreements – your current contracts with sellers of organic produce; and
Employment contracts.

Protect your business name:

Once you have chosen your purchaser and the sale of business documents are complete, ensure goodwill continues for your business by introducing your purchaser to staff, customers, and produce sellers. Make sure your purchaser understands how to maintain those personal business relationships, and how to choose and preserve high quality organic produce so that the good reputation of the business continues once ownership is transferred.

This is general advice only. Liability limited by a scheme approved under Professional Standards Legislation. 

Published Jul 24, 2017

Clifton Hill Jessica Kerr Sinclair + May jessica@sinclairmay.com.au

Jessica Kerr is the Director of Sinclair + May, a female-led, boutique commercial law firm based in Melbourne’s inner north.  Sinclair + May work with small businesses to ensure their legals are in order. Book a free 15-min chat here to talk with one of our solicitors.

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