Once you’ve worked out the fundamentals, it’s time to start seriously preparing for your exit. The preparatory measures will differ depending on whether you’re selling the business or passing it on. Either way, things will go more smoothly for all parties if you’ve prepared for your business exit before you walk out the door.
1. To-do list: Selling your business
1. Improvements - Few potential buyers want to purchase a ‘fixer-upper’. If your business is crying out for some improvements, be it new equipment, better-trained staff or a website refresh, look to take care of these things before going to market.
2. Valuation - It can be surprisingly difficult for a business owner to come up with a realistic business valuation. To avoid setting the price too high or low, consider engaging an independent valuer.
3. Communications - Work out what information to share with stakeholders such as staff, customers and suppliers, and when to share it. As a general rule, taking a need-to-know approach will minimise workplace disruption and industry gossip.
4. Tax - With the help of your accountant or financial planner, understand any tax liabilities from the sale of your business and the soundest way to plan for that.
5. Legal - Talk to an experienced business sales legal practitioner to ensure any legal implications around the sale of your business are taken care of.
2. To-do list: Passing on your business
1. Structural - Consider whether the legal structure of the business will need to change. For example, it might make sense for you to operate as a sole trader, but if you’re handing the business on to two or more family members, they may need to run it as a partnership, a company or even possibly a trust or co-operative.
2. Practical - Take care of the practicalities. Is there a family member willing and able to assume operational control of the business? Do they already have the skills they need, or do you need to train them?
3. Legal - Think about the legalities. What will happen with the business’s ABN/ACN, domain name, lease, licences and insurance policies? You should also consider the legal implications if either yourself or your beneficiaries become ill.
4. Familial - It’s important now to consider all aspects of family dynamics. If a family member is taking over the running of the family business, are they also taking complete ownership of it? If not, what will be the rights and responsibilities of other family members who may have an equity stake in the business, but no day-to-day involvement? For scenarios like this, putting in place a dispute-resolution mechanism to resolve any future disagreements about the direction of the business can be a powerful way of protecting both your family and your business legacy.