Strengthen the balance sheet
This is a great time to work with your business advisors to take the right steps for your business. Accountants can help assess your financial position - such as ensuring your balance sheet is strong, with assets outweighing liabilities, and identifying any red flags like excessive debt or obsolete equipment that could signal trouble ahead.
Practical steps include:
- Reviewing the valuation of assets such as property and equipment at market value. Sell anything underperforming or not required.
- Reducing liabilities or consolidating debt to improve your financial position.
- Checking inventory or raw materials on hand are relevant to your industry. Clear out anything dated and trim down what you hold. Use just-in-time logistics.
- Working to improve current and equity ratios, which signal stability to buyers. Some options include reducing your drawings, paying off debt with surplus cash, or converting an overdraft into a term loan.
- Refinancing existing debt to secure better terms or lower interest rates can also strengthen your balance sheet.
A financially healthy business for sale not only attracts more buyers but also supports a stronger negotiating position.
Improve profitability
Profitability is a clear sign of a well-run business and reassures buyers they are purchasing a sustainable venture.
Ways to lift margins include:
- Expanding your customer base or introducing new products and services.
- Reviewing your pricing strategy so it balances competitiveness with healthy returns. If you can, increase prices across your business, even by small margins.
- Reducing cost of goods sold by negotiating with suppliers or adopting more efficient production methods.
When it comes to selling a profitable business, higher margins can directly translate into a higher valuation.
Reduce the loss of intellectual know-how
Once you’ve left the business, buyers want confidence that day-to-day operations will continue smoothly without you needing to be involved at every step. One way to achieve this is by creating standard operating procedures (SOPs) for key areas such as sales, marketing, and customer service.
- Documented processes give buyers reassurance that the business can run consistently and efficiently.
- Introducing software and automation tools like customer relationship management (CRM) systems, accounting platforms, or inventory management solutions can improve operational efficiency for business sale.
- Investing in staff training and offering incentives or performance bonuses helps employees take ownership of their roles.
- Your competitive advantages, marketing plan, how you’ve handled sales cycles and cashflow, and key agreements such as contracts, leases, and intellectual property.
Together, these steps make processes repeatable and efficient, which helps any perceived risk that the business will struggle after you’ve left.
Resolve disputes
If there are any ongoing legal matters, seek advice and work towards a settlement before putting the business on the market.
- Solve any employee grievances or improve workplace conditions to create a more positive environment.
- Resolve disputes with customers or suppliers to remove uncertainty and demonstrate professionalism to potential buyers.
Buyers prefer companies that are free from distractions and risk, so taking time to resolve disputes now will make your business more attractive and may help secure a better sale outcome.
Eliminate unnecessary expenses
A lean operation is more attractive to potential buyers. Cutting waste improves profit and demonstrates discipline in financial management.
Practical measures include:
- Reviewing contracts and removing non-essential services you don’t need.
- Outsourcing functions like payroll or IT if it’s more cost-effective.
- Auditing expenses to identify what is non-critical, then cutting or minimising.
- Cancelling or downgrading subscriptions or licences that don’t deliver value.
Reducing unnecessary costs not only improves profitability but also shows buyers they are investing in a well-managed business.
Improve cost efficiency
Cost efficiency goes hand in hand with profitability. Buyers are attracted to businesses that have optimised operations and reduced waste.
Consider:
- Reviewing supplier contracts for better terms or alternatives.
- Implementing tighter inventory management to avoid overstocking or shortages.
- Identifying inefficiencies in labour or production and removing bottlenecks.
Demonstrating ongoing business sale preparation in this way makes your business more appealing.
Diversify revenue streams
Buyers value businesses with multiple income sources, as it lowers risk and increases business growth potential for buyers.
Examples include:
- Adding complementary products or services.
- Expanding into new geographic regions or customer segments.
- Introducing subscription or membership models for recurring income.
A diversified business appears more resilient and better positioned for long-term success.
Accurate financial statements
Nothing puts off buyers faster than inaccurate or incomplete records. Clean, transparent financials are essential for credibility.
Steps include:
- Working with your accountant to prepare up-to-date financial statements.
- Organising tax returns, profit and loss reports, balance sheets, and cashflow statements.
- Being ready to provide supporting documentation during due diligence.
Accurate records not only support the valuation but also build buyer trust during negotiations. It’s common for buyers to request at least three years of financial statements, including income statements and balance sheets.
Help and resources
ASB has a range of tools to support steps to sell a business and business sale preparation. Explore the ASB Business Hub for:
- Guidance on business planning.
- Resources on succession, transition, and sale preparation.
- Tools to help you plan your financial future.
Next steps
- Start early and take a structured approach to preparing a business for sale.
- Focus on profitability, efficiency, and accurate financials.
- Resolve disputes and reduce unnecessary costs.
- Diversify revenue streams to attract more buyers.
