Buying & Selling A Business
Buying a business is a serious commitment – in fact, it may be one of the most important decisions you’ll make in your lifetime. The bottom line? You need sound financial advice before you go ahead with purchasing a business.
An established business may come with an existing customer base that is already trading and producing revenue, reducing uncertainty when it comes to going into business. On the downside, you may also inherit any existing problems with the business, and they won’t always be obvious.
That’s why it’s absolutely vital to complete extensive due diligence before you buy a business. Having an experienced business accountant evaluate all the documentation before you agree to make the purchase is a crucial step – ignore it at your peril!
If you’re interested in purchasing a business in Mandurah or elsewhere in Western Australia, get the best business accountant on your side – WealthVisory can help ensure you get a fair deal and set you up to succeed.
Due Diligence When Buying A Business
What does ‘due diligence’ really mean when purchasing a business? The reality is that the information you’re given from a seller is always going to be one-sided. Due diligence allows you to verify their side of the story and ensures you’re getting exactly what you pay for when buying a business.
This doesn’t mean the seller is untrustworthy – only that it’s vital to get a third-party perspective, particularly from experienced legal and financial advisors.
Getting an accountant to help with due diligence means they can verify not only the financial records presented by the owner, but also the way they’re being interpreted. For instance, are the profit figures and forecasts given by the seller accurate? Are the methods used to evaluate profit and forecast revenue sound? Are the statistics used to show the demand for the product and size of the market accurate and reliable?
Even if the financial statements match up to the profit and revenue figures you’re given, an accountant can pick up on any issues with the forecasting methods and other forms of bias that aren’t so obvious to a casual viewer.
Valuation of business assets is another key issue that plays an enormous role in the ultimate cost of buying a business, and one that requires detailed evaluation by an accountant.
If you need an accountant to assist with due diligence, why not give us a call and find out how WealthVisory can help.
Selling A Business
If you plan to sell a business, it’s absolutely vital to have thorough, accurate documentation to present to potential buyers. And even if you’re not ready to sell yet, there’s plenty you can do right here and now to ensure you recoup your investment in the event of a future sale.
Financial record-keeping according to best practices will ensure your business is valued accurately in the future, including the value of any business assets.
An essential part of selling a business in Australia is coming up with an accurate business valuation. To properly calculate the value of your business, you’ll need the assistance of a business accountant – not only are the ins and outs of business valuation complex, but there are many different methods of valuing a business.
Adding up the value of assets minus debts and liabilities – the ‘balance sheet’ method – rarely captures the true value of a business. Various other business valuation methods draw their price from the business’ past and projected revenue, price-to-earnings (P/E) ratio or via discounted cash-flow analysis to determine the net present value.
Assistance from a business accountant is absolutely essential when you’re trying to sell a business. In the best case scenario, an inaccurate valuation will leave you undercompensated or may mean that you’re unable to find a buyer. WealthVisory can help determine the accurate market value of your business and present documentation to potential buyers to clarify how it’s done, helping to ultimately secure the sale.
If financial data provided isn’t accurate and comprehensive, you may face legal consequences on the basis of fair trading or later legal action from the buyer. So when you’re looking to sell your share in a business and move onto new ventures, it’s vital to have the right accounting support.
WealthVisory can help to prepare your business for sale, value your business accurately and ultimately get the maximum return on everything you’ve invested. For an obligation free chat about how we can assist with selling a business, contact us via phone or email.
Business Exit Planning
When setting up a new business, one of the last things people want to think about is how their new venture will end. However, having an exit strategy is an important consideration for every business plan.
One key reason is that your exit strategy is closely tied with the long-term goals of the business. For instance, if you plan to grow a business and eventually sell to investors, your business strategy and goal setting will be crafted with that destination in mind.
Similarly, if your ultimate motivation for going into business is to create a livelihood and legacy for your family, a succession plan is at the heart of what you’re aiming to accomplish.
It’s also important to have some idea of how you’ll exit the business in case of an unexpected event, if you’re no longer able to manage the business or simply if the business is no longer financially viable.
Either way, a business exit plan anticipates how you plan to wind up your involvement in the business while either withdrawing an overall profit or minimising losses.
Business owners really can’t afford to leave exit planning until later, because the groundwork to effectively value a business for future sale starts right here and now. Failing to maintain proper financial records can make it very difficult for owners to recoup their investment in the business in the event of a sale.
If you don’t currently have an exit plan for your small business, WealthVisory can help. As Mandurah’s business accounting experts, we can ensure your financial records are robust enough to value the business properly in the event of a sale, effectively protecting your investment.
Business Succession Planning
If you own or manage a business in Australia, it’s important that you consider what will happen to the business when you’re no longer able to – effectively, when you retire or in case of an unforeseen event.
Just like managing wills and estates, this isn’t something that people like to think about ahead of time, but failing to have a succession plan in place can cause a lot of heartache for family members in an already difficult time. Taxes and probate delays upon the death of a business owner can further complicate matters, and can mean the business is no longer viable by the time these issues are resolved.
It can be easy to assume the business will be carried on by those who inherit your share of ownership, but in reality, only a third of all family businesses successfully make the transition to the next generation. Disputes over ownership and business decision-making can be destructive to family relationships, particularly when divorce or separation come into play.
Fortunately, with focus and planning, it’s possible to set up a comprehensive succession plan to anticipate these challenges and ensure things are as clear as possible in the event of an accident or illness.
Even if you plan to step back from the business when it’s time to retire, it’s important to ensure financial record-keeping is set up to accurately value the business and its assets. When the retiring generation looks to the value of their share, they tend to look at a balance sheet number.
In fact, the true value of a business should probably be based on an earnings capitalisation model, a concept unfamiliar to many smaller family businesses.
Luckily, WealthVisory can help to establish a succession plan for your business, ensuring that everything is taken care of in the case of a sudden illness or accident. Don’t put it off any longer – take proactive steps to future-proof your business and contact us today.
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To find out more about the services that we offer at WealthVisory, book an appointment online with us today.