If you’re considering selling your company, it’s vital to ensure you properly prepare your company for sale. There are many steps that you can take to ensure your company is in the best shape possible for offering to the market for sale. In this article we look at three simple steps that in our experience will increase the value of your company and increase the sale prospects of your company.
Separate Revenue Reporting
Good financial reporting enables you to clearly demonstrate the financial performance of your company historically. When preparing your company for sale, if your company has different revenue sources, be it from different locations or different service offerings, you should look to record the revenue from each different category, geographic area and service type separately in your accounts. This will enable you to demonstrate to potential buyers of your company where your revenue comes from, and thus enables buyers to better understand the financial performance of your company.
Many private companies may incur costs that are not necessarily required for the day-to-day operation of the business. In offering your company for sale, it is important that you can easily and credibly demonstrate what these non-commercial expenses are, and thus demonstrate what the true, underlying, commercial profit of your company is. In preparing your company for sale, you should ensure that you have a clear understanding of the type and quantum of non-commercial expenses that your company has incurred in the five years leading up to your sale – that way you can clearly demonstrate to potential buyers of your company what expenses don’t relate to the ongoing operation of your company.
One-Off Expenses and Capital Expenditure
Most businesses will periodically need to incur capital expenditure from time to time – maybe it is to purchase new motor vehicles, or to purchase new machinery for the business’ operations. In the lead up to selling your company you should work to keep a reliable record of all capital expenditure incurred by the company, inclusive of what assets of other capital items have been purchased, the cost of purchasing those assets, and their expected useful life. Maintaining a good record of capital expenses will ensure that you can easily demonstrate to potential buyers of your company what investments you have made in your business that will provide ongoing future benefit to the company, and also show what the likely future ongoing capital expense requirements of the company will be.
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Groves & Partners are specialist mid-market M&A advisors and brokers. We sell businesses valued over AUD$1 million, and are known for our thorough approach and our ability to conduct strategic business sales at great prices and terms for our clients. We also partner closely with our clients and their advisors to ensure our client’s companies are well prepared for sale.