How to Prepare Your Business for Sale in 2023

Preparing your business for sale

With the current financial year not far away, many business owners will be asking their accountants to have their 2023 financials completed with the intention to put their business on the market.

Of course, all business owners will strive to achieve the best possible price and conditions for the business they have put their heart and soul into.

Well, taking the time to prepare your business for sale will play a huge factor in how much you walk away with. Here are some tips to make sure that your sale starts on the right foot.

Seek tax advice

Before you proceed too far seek advice on your position regarding taxation and potential capital gains tax implications, that you may have if you sell.

REIQ contracts for the sale of a business also include a provision for staff entitlements, so it’s wise that know where you stand upfront, as business owners with several long-term staff may get a shock on what is payable. 

Clean financial records

A buyer will engage several professional advisors including an accountant, solicitor, and financial advisor. During the due diligence process these advisors will carry out a forensic check on all revenant information pertaining to the business. Ensure your financial records are up to date to clearly demonstrate the true profitability of your business to a potential buyer. Your business broker will help you present these in a professional manner.

Minimise your input and hours worked - Buyers want to know that the business will continue smoothly after a sale is completed, so make it easy for them to step into your role. If you have all the knowledge and skills to run the business, a buyer's greatest fear is that the business will fail when you walk out the door, so surround yourself with switched on industry players to minimise this risk.

Comprehensive documentation

Document and systemise all business activities as this will reduce the reliance on any one employee or operator. Also document any relationships which are key to your business. Convert any verbal agreements with suppliers and clients into written agreements wherever possible. Written agreements will make your business look stronger and build confidence in potential buyers. Examine existing contracts with suppliers and customers to ensure they will not expire or require renegotiation just as a new owner steps in. 

Keep stock levels under control

A business with high working capital requirements is less attractive than without, so keep stock levels to a minimum. Selling off obsolete, or slow-moving stock items will appeal to buyers, and this will also eliminate any possible arguments over the valuation of stock at settlement.

Control your debtor’s

Collect all payments that are overdue from your clients. A Buyer will base their cashflow and working capital projections based on your debtor levels and it will be a major concern if your customers are taking a long time to pay their accounts- nobody want to do business with people who don’t pay.

Tidy up your premises and equipment

You don’t get a second chance to make a first impression. The appearance and presentation of your premises can be a reflection on the business itself. Ensure that your business complies with all legal requirements including OH & S and health regulations. Make sure that all plant and equipment is well serviced and maintained.

Offload surplus fixed assets

Most businesses are valued on their profits so it you own assets that do not contribute to profit, sell them off. A purchaser will not pay extra for a vehicle that is simply sitting in the car park or an old machine that is now redundant.

Clean Lease

Ensure that you have a good lease with a long tenure period or further options in place. Banks won’t finance a business without good tenure in place and a secure lease. Buyers want to know that if the business is location dependent, they can continue to trade well into the future and still have tenure should they choose to on sell. 

You only sell your business once and you've only get one chance to get it right. Spend the time and effort preparing the business for sale and you will be rewarded with a strong sale price and acceptable terms and conditions.