A guide to completing your asset list with Capital Commercial Business Sales.
What is an asset list?
An asset list is a detailed written list of all the assets with dollar values. The list should include both tangible and intangible assets (explained in greater detail below) that will be transferred to the buyer when they purchase your business.
By omission, the asset list also indicates items not included in the sale.
The asset list is not an accounting document; it is a sale tool and is primarily used to demonstrate and defend value to buyers.
Save time and money having by having your asset list prepared before you go to market.
In almost all cases a business sale is achieved by both seller and buyer executing a business for sale contract. The contract is in most cases drafted by the seller's solicitor.
All the assets to be transferred should be written in the contract. It saves time and money to have that list ready to go and available for your solicitor as soon as you reach the agreement with the buyer.
When drafting the sale contract, your solicitor may need to make adjustments and changes to the assets in the contract as items may have been replaced or added during the marketing campaign.
Different types of assets.
Essentially there are two types of assets, tangible or intangible assets.
Our goals when marketing and selling your business are to present as many assets as possible, with accurate values which can be justified to a buyer.
Some examples of tangible assets:
|Item ||Examples and rule |
|Business furniture ||Desk, chairs and cupboards. Exclude any personal items that you will not be providing as an example; family desk. |
Fixtures and fittings or fitout. Can be defined as leasehold improvements
Plumbing, lighting, air-conditioning and partitions. Also things like product displays. Be certain that the improvements or assets are not owned by the property owner.
|Equipment ||Fridges, ovens, computers and anything that is used by the business that will be transferred to the new owner. |
Items that are in production that have not been finished. If you were a carriage builder and there were 5 completed carriages that you were going to transfer to the buyer with the sale. It’s important not to confuse stock with inventory. Stock are the products sold on a daily basis and inventory is considered to be the materials used to produce finished goods.
This would include any vehicles that are to be transferred.
If property is going to be included with the sale.
Menus provided to customers. Signs fixed to buildings. Artwork placed in offices.
Helping you set the values of tangible assets.
Tangible assets are probably the easiest items to set a value for, because you should be able to provide evidence of similar items that are for sale.
In many cases, both buyers and sellers can even find comparable items for sale through equipment distributors, equipment websites, suppliers and other used-equipment outlets, which can help establish current market values.
If you cannot find a comparable item and or value, then we ask you to estimate the value of those assets. This process should take into account what the fair market value to replace that item is, and values that we can defend when working with a buyer.
Some examples of intangible assets:
|Item ||Examples and rules |
Intellectual property rights assets, including trademarks, patents, licensing agreements, and trade secrets
It can sometimes be difficult to attribute a value to these types of items. Ensure that the values are defendable and reflect how the new owner will benefit from owning these items.
|Logos and graphics || |
Files provided at settlement. You can use the cost replacement principle. A foundation that is often used when determining these values is what the cost is to create today.
|Client lists and databases || |
Let's assume that the seller proposes to transfer a customer database that contains 5000 customer records that include contact details and customer history. A value of $10 per customer could be attributed based on the cost to generate and record the customer details. In this case, the total value of the database would be $50,000.
|Websites and domain names || |
Development and content investment and website ranking placement can be used to assign value.
In addition to ranking and development costs, the number of leads generated organically through the site can assist in determining value.
| Phone numbers || 1300 and 1800 numbers and in many cases for sole trader businesses mobiles attached to the business. |
|Business names ||This should include all the business names that are being offered with the sale. |
|Procedure manuals || |
Many buyers are unaware of the time and resources allocated to create these systems and manuals.
Please ensure that you outline the total number of different types of manuals for example Procedure Manuals x 24.
|Proprietary technology, systems, and processes || |
An example of these types of intangible assets could be technology that you have developed or have access to that will be transferred with the sale.
This could include prepaid licences or ownership of software licences.
Helping you set the values of intangible assets.
Intangible assets can be harder to set values for because many of these items are proprietary and unique to your business.
Having a considered rationale about how you determined the value of these assets is important.
Measuring the businesses benefits from owning the asset is also a good way of arriving at a value for individual items.
A good example of measuring an economic benefit could be the sales or leads converted from your website or generated through your Facebook page. These leads are measurable, have value and assuming all remains constant should generate revenue for the incoming owner.
If you are struggling to determine values for your intangible assets talk to your business broker, or accountant for guidance.
How to complete the asset list.
Your business broker or business information writer will email you a blank copy of the of the excel spreadsheet template. All you need to do is simply type in the item description in the asset column and the replacement value in the corresponding column.
Frequently Asked Questions:
Q: Can we just use the deprecation schedule in the financial statements?
A: Commonly, the deprecation schedule will not accurately reflect all the assets and the replacement or market values of the assets that are being offered for sale.
Q: What do we do if we cannot determine the value of assets?
A: In most instances you will be able to determine a fair market value using open sources like price lists and third party websites. If you are struggling to determine value, then ranking is one option. Ranking the values against other similar assets. You can also call your broker to discuss it.
Q: How detailed should the list be?
A: Well that depends on the business and the total scope of the assets being offered with the sale. If you’re a restaurant its advised not to list every type of cutlery being sold e.g 45 knives and 64 spoons, but rather group certain types of assets like cutlery.
The main principle to observe is that this lists purpose is to defend the value of the business. Therefore, the more comprehensive and reflective of true value, the better. We have had some Asset Lists go over 3 pages.
Q: How should works in progress, accounts receivable or work contracted but not invoiced yet be managed?
A: In most conventional business sales in Australia (95%+) the entity that owns the business and its assets is not being sold. In the case that we are selling the company then please speak directly to your broker about how to approach this.
We do not include work in progress or work contracted in the asset list, we deal with this in separate section of the business information package. These assets have different values based on the stage and cycle of production and delivery of the product or service, and we negotiate the sale, transfer or how we manage these items separately from the asset sale.
Q: What about items that are leased or financed?
A: If the item that is leased or financed is going to be paid out and is fully unencumbered then include its market/replacement value in the asset list.
If you are aiming to assign the lease and or finance agreement to the buyer as part of the sales process, then it should not be included in the asset list. Leased or financed items that are to be assigned should be documented and stated in the business package, but immediately after the asset list section.
The expenses of the leased or financed items listed on the profit and loss can be added back to the earnings report if the financed item is going to be paid out. This is because this finance expense will not apply to the incoming owner.
Q: Can we update the asset list during the marketing campaign?
A: Yes, most definitely and we encourage it. As the list will form part to the business for sale, we advise that you regularly update send through us so we can update your business sales package.
If you require any assistance in preparing your asset list, please contact your business broker or designated business information package writer.
When completed please email to email@example.com.
An example of an asset list completed by a seller.
The item shown below is an example of a completed excel spreadsheet asset list. We will now use this list in your business sales package and for marketing purposes