We talk to our clients a lot about selling businesses and as their baby boomers are ageing out of the business lifecycle, it’s really important for everyone to have a think about selling your business in the future. In the previous blog, I mentioned, you should always start your business with the end in mind. That’s great advice if you’re starting a business but if you’ve got a business that you’re wanting to exit, and you haven’t done that well, you need to get a plan now. You really need to start that plan three years out from selling your business. That means that you need to take action.
One thing as accountants that clients always say to is, “I want my profit to be as low as possible, so I pay less tax”. That’s great until you want to go and borrow money, or until you want to sell your business because if your profit is low, the value of your business is going to be low.
What you need to do three years out from selling your business is make a plan. We look at your financials, and we start stripping out those additional expenses that you’ve got in the business because they nice to have all their expenses that are technically deductible, but it’s about the way that you run the business and it might give you more enjoyment or, or some more income by doing so. We strip them out, we start going back to basics, we try and get your business as profitable as possible and yes, that means you will pay more tax for three years. But I can guarantee you the extra value that what you get when you sell your business will be more than three times the extra tax that you pay, if not ten times.
It is vital that you look at your business at least three years before you want to exit because purchasers always want to look at 3 years figures. Get your plan in place, get your systems in place, and empower your staff to have everything sale-ready, so that when you’re ready to sell, we can go to the business broker and go here is an awesome business that’s not reliant on the business owner.
Here’s the systems, here’s the procedures, here’s a great profitable business that someone can buy and run themselves or put a manager in, because that is going to give you a higher price and it’s going to position your business higher in the market than if there’s a similar business in the same industry and it’s going to get you a better buyer.
In a nutshell, at lease three years out from when you want to sell, come and see us. Let us delve down and let us help you make the right decision to get the most bang for your buck.