Building Value into your Business Before You Sell

First impressions count. Attend to any maintenance work and replace, fix and paint where required. Maintenance work is easily overlooked but keep in mind that for a relatively low outlay, the resulting increase in profit obtained will be well worth the effort involved.

Assess whether the business accounts reflect a well-run and hopefully profitable business. The value of a business is invariably determined by its current and future profits, buyers and lenders will look at the performance of the business in the immediate past and possibly up to the last three years, to guide them in an assessing future trends and profits. Look for ways to increase sales and reduce your costs.

The strongest influence you can have as a proprietor is to ensure that your business is as efficient and profitable as possible. This proven track record will provide the purchaser with tangible evidence of potential value for the future.

Assets which are not essential to running the business should be removed from the balance sheet. These assets may include surplus plant and/or vehicles. Removing these assets from the balance sheet prior to sale will ensure that the price being asked for the business is only for assets essential to its running and will not unnecessarily inflate the price beyond the reach of the purchaser.

Review stock on hand as clearing out dated or surplus stock prior to the sale will ensure that the value of the business is maximised while at the same time minimising the entry price for the purchaser and making it more attractive to them.

Compile a comprehensive list of all assets and their values. Keep in mind that where these values exceed book value, you will be liable for taxation on the depreciation recovered. This can be further complicated when sale negotiations coincide with the balance date. An adjustment to goodwill can reduce the taxation impact.

Goodwill is subjective and you need to do all you can to quantify the value held in customer lists, trademarks, formulas etc. Usually your goodwill is tax-free, however if you are receiving goodwill for a business where a lease is attached, it is important that you receive clear information on any tax implications.

Get your presentation and profitability right, with your systems documented - and you will be well on the way. For more information on building value into your business visit www.nzbizbuysell.co.nz.

Information provided by www.nzbizbuysell.co.nz.



Building Value into your Business Before You Sell - To learn more about this author, visit Rob Keating's Website.

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