Preparing your business for sale: what to fix before you list

Most business owners spend years building the place up and about three weekends thinking about selling it. Then they wonder why buyers chip away at the price.

Here’s the thing. Buyers pay for certainty. Every question they can’t get a clear answer to becomes a reason to offer less, or walk. So the work you do before you list is often worth more than anything you do after.

General information only. Get proper advice on the legal, tax and financial side of your own sale.

Give yourself time

If you can, start preparing a year or two before you want to sell. That’s enough time to:

• Get a clean set of financials on the board
• Fix the things that drag the price down
• Show a trend, not just a promise

If you need to sell sooner, no stress. You’ll still get a lot out of the steps below. You just won’t have the runway to show a full year of the “after” picture.

1. Clean up the books

This is the big one. Buyers value a business on its earnings, and lenders will want to see them too. (Here’s how buyers value a small business, so you know what you’re up against.)

• Keep the books up to date and reconciled, month by month.
• Stop running personal stuff through the business, or at least keep a clear record of it so it can be added back with evidence.
• Put every dollar through the books. Cash that isn’t recorded can’t be valued. Simple as that.
• Get your tax returns and BAS lodged and lined up with the financials.

Clean books are the cheapest price rise you’ll ever get.

2. Make yourself less important

Hard to hear, but if you are the business, buyers get nervous. If all the customer relationships, supplier deals and know-how live in your head, what happens when you walk out the door?

• Write down how things are done. Opening, closing, ordering, quoting, the lot.
• Train someone up to handle the jobs only you do now.
• Introduce key customers to your staff, so the relationship isn’t just with you.
• Take a holiday and see what breaks. Then fix it.

A business that runs without you is worth more, full stop.

3. Sort out the lease

For most small businesses, the lease is one of the biggest things a buyer looks at.

• How long is left, including options? Buyers and lenders like plenty of runway.
• Is the rent sensible for the sales the business does?
• Will the landlord consent to an assignment? Have a quiet word early if you can.
• If you own the premises, think about whether you’ll sell the property too, or keep it and lease it to the buyer. More in business plus freehold explained.

4. Spread the risk

If one customer is 40% of your sales, a buyer sees a cliff. Where you can, broaden the customer base. Get regular customers onto agreements that transfer. Make sure key supplier arrangements aren’t just a handshake with you personally.

5. Tidy up (yes, really)

First impressions count. A fresh coat of paint, a cleaned-out storeroom and fixed-up equipment cost little and make a big difference.

• Fix or replace tired equipment, or at least know what it’d cost so you can be upfront.
• Make a plant and equipment list with ages and condition.
• Chuck out the junk. No one wants to inherit your 1998 filing cabinets.

6. Get the paperwork in one place

When a buyer is serious, they’ll want documents fast. Have these ready:

• Three years of financial statements and tax returns
• BAS statements
• The lease and any variations
• Plant and equipment list
• Staff list with roles, pay and start dates
• Key contracts, licences and permits
• For franchises, the franchise agreement (and know your franchisor’s transfer process; see buying a franchise resale for the buyer’s side)

Much of this ends up in the Information Memorandum that buyers will read after signing an NDA.

7. Keep it quiet

Don’t announce the sale to everyone. Staff, customers, suppliers and competitors can all react badly to the news. That’s why serious buyers sign an NDA, and why some businesses are sold completely off-market.

8. Keep trading hard

The most common mistake I see? Owners decide to sell and take their foot off the pedal. Sales dip during the sale process, and buyers notice. Keep running it like you’re keeping it, right up to settlement.

9. Be realistic on price

Everyone thinks their business is worth more than it is. I’d be the same. But a business priced well above what the numbers support just sits there, and a stale listing makes buyers wonder what’s wrong with it. Get an honest appraisal, then decide.

A quick self-check

Before you ring anyone, answer these honestly:

• Could someone else run the place for a month without ringing me?
• Do my books show the real profit, with nothing hidden?
• Is there at least a few years left on my lease, including options?
• Could I hand a buyer every key document within a week?

Four yeses and you’re in good shape. Fewer, and you’ve got your to-do list.

Thinking about selling?

Have a look at how we sell businesses and our track record. You’ll see the kinds of businesses we’ve sold and the towns we cover, from Townsville to Normanton.

Want an honest conversation about what yours might be worth and what to fix first? Give me a call. No pressure, no fancy brochure. Just a straight answer.

Frequently asked questions

How long does it take to sell a small business?

It varies. Some sell in a few months; others take a year or more. Preparation, a sensible price and good records all help. Building in time for buyer due diligence and approvals (landlord, franchisor, finance) is important.

What increases the value of a small business?

Generally: reliable, well-documented profits; low dependence on the owner; a secure lease; a spread of repeat customers; good staff and systems; and well-maintained equipment. Anything that reduces risk for a buyer tends to lift the price.

What documents do I need to sell my business?

Typically: two to three years of financial statements and tax returns, BAS statements, the lease, a plant and equipment list, staff details, key contracts, and any licences or permits. For franchises, the franchise agreement too.

Should I tell my staff I'm selling?

Usually not until the right time. Many vendors keep the sale confidential until a deal is close, then tell key staff. Buyers sign an NDA before receiving details for exactly this reason. Get advice on your obligations as an employer.

General information only. This isn't financial, credit, tax or legal advice and doesn't take your circumstances into account. Get advice from a licensed professional before you act.