Keys to maximising your business sale by Matt Richards

At Accounting North, our clients are predominantly small to medium enterprise (SME) business owners.   Most if not all of our clients have either started a business or purchased a business, some more than once.  Hopefully, most will sell their business at some point in the future and the sale proceeds will help fund their retirement plans in conjunction with any super they may or may not have.

Buying a business is a seemingly straight forward but relatively high risk transaction.  But it happens in a short amount of time.  At the time of purchase, a buyer has the resources of a range of advisors including their accountant performing due diligence, their lawyer, quite often a business banking manager/business finance broker and more.  So their decisions including how much they pay for the business and how they structure it is usually guided by a significant amount of experienced advisors.

For many small business owners, their business is often their main investment and the eventual sale will potentially be a major part of their retirement funding.  So getting this process right is vital.

When business owners sell their business however, it is regularly done with very little planning or forethought.  The best time to start planning for the sale of your business is right after you start or buy the business.  Not when you are ready to leave!

Greater benefits are generated the sooner the planning process commences; and whilst the focus is always on a planned succession, this sort of planning is also crucial to reducing the risks associated with an unplanned succession (for reasons such as ill health, partnership breakdown, economic factors etc).

We have all heard about baby boomers and an oversupply of businesses trying to be sold over the next 10-15 years compared to the number of potential buyers in the market.   If this occurs, it just means businesses will be harder to sell and will be harder for sellers to extract the same values as they may have previously.  So you need to be doing everything to make your business as attractive to a potential buyer as you possibly can to maximise your return.

So the keys to maximising your return when selling a business include:

• Plan well in advance
• Understand & manage the capital gains tax consequences on sale
• Don’t be owner reliant
• Obtain loyal & long standing clients
• Be innovative & different
• Implement good systems
• Benchmark your performance
• Develop loyal & committed staff
• Place succession planning processes in place

And guess what…most of the above you can influence or control to a large degree.  Preparing in advance (usually 3 plus years) gives a business owner the opportunity to maximise the value drivers that increase the value of their business when it is sold.

If you currently own a business and are contemplating a sale or even retirement in the near future (0-5 years) ask yourself the following questions:

1. What is my current business value?
2. What value do I need to sell my business for to retire (or just to be satisfied)?
3. Is there a shortfall and if so what do I need to do to make this up?

For most business owners, these are three questions they have never asked or contemplated, let alone have the tools or knowledge to accurately answer.  If that is you, then give us a call and we can definitely help.