When divesting from a business the evidence overwhelmingly supports optimum results, through careful planning.
The view is commonly held that the best time to commence planning is before the commencement of the last financial year prior to sale. This is the final opportunity for the business owner to make any management or operational improvements towards maximizing the profitability to be reported in the last annual profit and loss statement, before marketing commences.
Such improvements with the approval of the business’ accountant or business advisor might include:
- Adjustment of the owners hours to reduce payroll expenses, improve general profitability, or to develop the management
structure.
- Development of Human Resources being sold with the business, if required.
- Strong focus on sales and marketing to raise turnover and profitability, demonstrating growth.
- Review of spending in areas such as ‘one-off’ Consultancy Fees, Training and Capital Expenditure, generally reserved for the long term development of the business.
Some of these items can be identified in the Information Memorandum at the time of sale, as being extraordinary expenses (Add-backs), however, there can be no stronger justification of your business than the Profit and Loss Statement prepared by your accountant for tax purposes, showing a healthy transparent trading profit.
Planning the sale of your business should include collaboration between you, your business broker and your accountant. Merchants can advise on the position of the market, likely buyer profiles and perceptions, opportunities and areas of resistance that the business might have to endure when the time comes for it to be offered to the market.
With such intelligence your accountant will be in a better position to advise on timing, tax implications, superannuation and reinvestment; perhaps again with the assistance of Merchants.
Your commercial solicitor should also be contacted in advance of your business being offered for sale, to ensure any special conditions can be practically incorporated in to the contract for sale.
For more tips on selling your business view http://www.merchants.net.au/selling/documents.asp (Business Sales and Acquisitions)