So you want to sell your business huh? Time to get in shape then because serious buyers are going to want to see good looking financials, not some amateurish hodgepodge of receipts and archaic sets of accounts.
Getting your financials sorted early
Just like getting your winter body in shape for summer your accounts need to be looking great to attract the best buyers. If you’re prone to hiding income and claiming lots of personal things then you might want to start thinking differently well before the business goes on the market.
Anyone seriously interested in buying your business will want to verify your accounts and perform a due diligence on it. This’ll include checking that your accounts match your GST returns so those of you who already have us taking care of your GST returns & monthly reports can feel pretty chuffed right about now because you’re guaranteed to receive an A+.
Decide what you’re selling
The easiest way to sell your business is to sell the company shares but most buyers won’t be keen on this because it means taking onboard any skeletons you might have hidden away. It’s more common for the buyer to take a pick and mix approach buying only the bits they really want. They could be after your brand, key clients, location, fixed assets, intellectual property or staff. Things tend to get complex at this stage and if you try to do-it-yourself, without professional advice, you’ll find yourself falling into a bear pit of problems.
Ultimately, the aim is to maximise the amount of tax-free goodwill generated from the sale and avoid paying tax unnecessarily by triggering a depreciation recovery, a hefty GST bill or having to pay the new owner for your shareholder loan. Every deal is structured differently so make sure you get a good Chartered accountant involved early.
Squeaky clean everything
To get the best price for your business you need to get inside the head of your potential buyers. Most will want to see they’re buying a business that can survive without you. That means putting great systems in place, having up-to-date business manuals, supplier agreements and current employment contracts to tie your best staff in or exit them rapidly. Many agreements will also require you to stay on in the business or impose a restraint of trade.
Get ready for words to be flung about like going-concern, price-earnings-ratio or earnings multiple. A good accountant will help you optimise your multiple of earnings, years before the business goes on the market, but only if you invest in the kind of accountant that’s actively involved in your business throughout the year.