In a recent article, we looked at when might be the best time to sell your business, what you need to have in place to make your business attractive to a buyer, and whether you and your business were actually ready for the sale.
The reasons to sell their business can be different for each business owner. However, they all have the same objective, and that is to get the highest possible return from the sale of an enterprise they’ve put their heart and soul into.
Show your business profitability
While profitability has many components, the most important thing that shows a prospective buyer or business broker how profitable your business is, is an annual budget & expenditure document that includes expected growth figures and how they measure up with your actual figures.
Your budget shows the nuts and bolts of how your business is working, how your cash flow is going and how big your profit margins are on your various products or services, and how much it costs you to operate the business.
Any experienced accountant and business broker will read these figures like a book, so they better stack up, too. They will know instantly if you’re hovering around the breakeven point, i.e. where your business neither makes a profit nor a loss. They are looking for healthy net profit margins, and in the end, figures are what counts in selling your business.
Believe me, profit and cash flow are not the same things.
You can still go broke whilst making a healthy gross profit if you don’t have the cash flow you need to meet your commitments. Your net profit margin is, therefore, one of the most reliable factors for your business success.
Go through your financials, get on top of your numbers and firmly take control of your business’ profitability. Talk to your accountant, if you need some help to work out strategies to increase your net profit and net margins. It might be easier than you think.
Make the most of tax minimisation strategies
The other thing any buyer will want to know is your tax situation. Have you got tax minimisation strategies in place to help maximise your profitability?
For some tips on how you can save on tax visit the Resources page on our sister website www.straighttalkat.com.au and download our free eBook “How to Slash Your Tax Legally”.
No matter if you want to sell your business in the near future or not, this is a MUST for all business owners because it can have a significant effect on both your business profitability and your retirement plan.
You should also make a personal tax minimisation plan for the sale of the business so that the tax man doesn’t get half your sales profits. That’s why along with an accountant and solicitor well versed in business sales and acquisitions, you also might want to talk to a financial planner.
They can look at your personal tax situation and the best way to minimise the tax that can be levied on the business sale. Our business clients come to us whenever they think about money because they know we combine accounting and financial planning services under one roof.
Save on costs
Showing that you have a good handle on your business costs is just as important as showing high profitability. A buyer or business broker would want to know what your direct and indirect costs are, so they also need to be itemised in your budget.
Undertake a business review and identify any areas where you could save costs. Sometimes it is not the obvious solution that will help you to do that, but all options should be on the table.
Utilising the latest technology for your business needs and building efficiencies into your operations may seem daunting at first, but it will serve a double purpose when it comes to selling your business. Good systems and operational processes are very important for business buyers or brokers when looking at scalability potential.
Copyright © 2017 Robert Bauman.