The sale of your business is the culmination of many years of hard work, so you’ll want to ensure you do everything possible to maximise its value in the lead up to this point. Consider these six tips now, as you continue to work toward its eventual sale.
According to RSM Bird Cameron’s recent thinkBIG 2012 study, 76 percent of business owners have no exit strategy for their business. This is of concern, given how much of a business owners’ wealth is tied up in the value of their organisation.
At least three to fives years are required to properly prepare for the sale of a business, according to RSM Bird Cameron national head of business solutions Andrew Graham. Even if owners aren’t ready to sell right now, it’s something they should consider so they’re prepared when the time comes.
“Business owners need to be aware of the impact of tax concessions, which ultimately reduce overall tax liability. This can have a fundamental impact on both the price the business is sold for and the ability to extract the maximum after tax benefit,” Graham added.
With this in mind, here are 6 ways to maximise the value of your business:
1. Strengthen ties with key customers and draw up contracts where possible – strengthening customer contracts is a great way of adding value to a business. Review your biggest customers and whether there is a contract or mutual agreement in place. Having hard copies of contracts with your customers will inspire potential buyers’ confidence. Contractual revenue is worth more than uncontracted revenue.
2. Train staff to run the business without the owner being present – having well trained staff in place is of huge benefit to any business. Buyers will also want to know if current staff will stay on after the owner leaves. Profit and business performance should be attributable to the management team not the exiting vendor.
3. Prepare for the sale at least three to five years prior to selling – start by getting the business independently valued and assessed so potential buyers can see what the business is worth, what the annual turnover is and how much tax is paid each year. Another consideration is how much capital gains tax will have to be paid when the business is sold and how a seller can go about minimising this. thinkBIG 2012 showed that 55 per cent of business owners are not aware of the tax concessions available on the sale of a business.
4. Speak to staff about selling the business – speak to staff about the sale of the business to ease concerns about their future and ensure the team is motivated, incentivised, accountable and locked in.
5. Prepare documents for sale of the business as early as possible – having the relevant documentation ready early will show potential buyers that you are committed to ensuring the sale process goes smoothly and will assist in managing the due diligence process.
6. Do not sell if the timing is wrong – be patient and be prepared to wait until the right buyer is found to maximise your sale value.
