Grahams Guide Chapter 4: 

Preparing Your Business for Sale

If you’re around twelve months away from selling, this is where the real work begins.

The businesses that achieve premium prices are rarely lucky. They are usually well prepared. Buyers notice organised businesses immediately, and good preparation reduces risk, builds confidence and creates stronger competition.

Start With Your Financial Records

Your financial statements tell the story of your business. Ensure they are accurate, current and easy to understand. Work with your accountant to identify one-off expenses, personal costs and anything else that could distort the true earning capacity of the business.

Document Your Systems

One of the most valuable assets in any business is knowledge that doesn’t live only in the owner’s head.

Begin documenting:

·        Daily operating procedures

·        Supplier relationships

·        Key customer processes

·        Health and safety systems

·        Pricing methods

·        Software and passwords

·        Maintenance schedules

Review Your Team

Strong staff add value. Review employment agreements, identify key people, address performance issues and consider how knowledge can be shared across the team. A buyer gains confidence when the business is not dependent on one individual.

Review Your Lease

For many businesses, the lease is almost as important as the profit. Check expiry dates, rights of renewal, rent reviews, maintenance obligations and assignment provisions. Uncertainty around premises can reduce buyer confidence.  However, if the business is not reliant on its location for its revenue and can be relocated easily, a short lease may be preferable. 

Discuss this with your broker before entering into a new lease.

Present Your Business Well

First impressions matter. Professional up to date website.  Clean and tidy workshops, offices and retail spaces. Repair obvious maintenance items, organise storage areas and ensure plant and equipment are clean and operational. Clean bathroom and kitchen.

Buyers often form opinions before the first financial statement is opened.

Reduce Owner Dependence

Ask yourself which decisions only you can make today. Then start transferring knowledge, delegating responsibility and empowering your team. Every step towards a business that runs without you increases its attractiveness.

Graham’s Tip

Don’t wait until the business is listed before improving it. Buyers pay for what they see today, not what you promise you’ll do tomorrow.

Build a Due Diligence Folder

Create a central repository containing documents buyers are likely to request. Your broker will thank you!  Examples include:

·      Financial statements

·      GST and tax records

·      Employment agreements

·      Lease documentation

·      Equipment lists

·      Vehicle schedules

·      Insurance policies

·      Health and safety records

·      Key supplier agreements

Common Mistakes

·      Waiting until the business is listed before preparing records.

·      Ignoring maintenance because ‘the buyer can do it’.

·      Failing to explain unusual financial results.

·      Leaving all customer relationships with the owner.

·      Assuming buyers won’t ask detailed questions.

Action Checklist

·      Meet with your accountant.

·      Review the lease.

·      Document key systems.

·      Prepare accurate financial records.

·      Address deferred maintenance.

·      Identify risks that can be reduced before marketing.