We are looking to sell our business at some stage over the next five years. Should we be getting the business ready for sale?
Yes. During the sales process, sellers often realise that if they had changed a few aspects of their business then they could have achieved a significantly better outcome such as a higher price and better after-tax outcomes. Therefore, it is best to prepare the business for sale well in advance. Below outlines three key actions to help accomplish this.
- Ensure the business performs well enough so that potential buyers do not flag any issues when looking at operational figures during the due diligence process. An attractive business entails having good margins, good growth prospects, and a reasonably low risk towards reductions in margins.
Buyers typically will review the business over the previous three years, and this is why it is important to start reviewing your company early so you can make corrections as necessary.
It is also important to have an understanding of the approximate market price of your business. Testing the market may assist you in identifying what steps can be taken to either enhance the selling price or make it more readily saleable. - Since the seller will hope for a large capital gain upon sale, it is important for them to look at their business structure and the subsequent tax implications that will occur from the sale.
There are various tax concessions available to small business owners depending on their business structure, and therefore it is important for them to work with their accountant to ensure they have the best structured position to take full advantage of these benefits. - Finally, it is important to select an advisor that can assist in the business’s sale process. A desirable advisor for SME’s would be one with investment banking experience, such as a boutique advisor or a big four accounting firm.
Management Advisors Pty Ltd is a highly sought after independent financial services firm and boutique investment bank. Their team has extensive experience in initiating, sourcing and negotiating M&A transactions to completion.