Exit Planning: How to Prepare Your Business for Sale

Exit planning is the process of getting your business, your finances and yourself ready for a transition — whether that is a sale to a third party, a management buyout, a family succession or a partial divestment. Done well, it increases the sale price, reduces tax and gives you control over the timing. Done poorly, it can leave money on the table and create personal liability issues that could have been avoided.

Why most owners leave it too late

Many business owners only think about exit planning when an offer arrives or burnout sets in. By then, it is often too late to fix the issues that buyers care about most: consistent earnings, clean financials, reliable management, documented systems and transferable customer relationships.

Buyers do not just buy last year's profit. They buy confidence that the profit will continue after you leave. The more the business depends on you personally, the riskier the purchase and the lower the price.

Start with your personal objectives

Before you think about valuation or marketing, be clear on what you want:

• How much after-tax capital do you need?
• Do you want to work in the business after sale, or exit completely?
• Do you care who the buyer is, or is price the main driver?
• What is your ideal timeline?
• How will you structure the proceeds for retirement, investment or family?

These questions shape every later decision, from whether to sell shares or assets to whether an earn-out is appropriate.

Get a realistic valuation early

A professional business valuation gives you a baseline and helps identify value drivers. Common valuation methods for SMEs include:

• Capitalisation of future maintainable earnings — the most common approach for profitable SMEs
• Asset-based valuation — relevant for asset-heavy businesses or liquidation scenarios
• Comparable transactions — useful where similar businesses have recently sold

The valuation is also a useful reality check. If the number is lower than you expected, you have time to improve the business before going to market.

Clean up the financials and tax position

Buyers and their advisers will conduct due diligence. They expect:

• Up-to-date financial statements prepared on a consistent basis
• Tax returns and BAS lodged on time
• Clear separation of personal and business expenses
• Reconciled balance sheet, including loans, inter-entity balances and stock
• Documented related-party transactions

This is also the time to review your structure. Selling shares in a company is very different from selling business assets out of a trust or sole trader structure. The tax outcomes — capital gains tax, GST, stamp duty and Division 7A issues — can vary dramatically.

Reduce owner dependence

A business that cannot run without its owner is worth less. In the years before sale:

• Build a management team that handles day-to-day decisions
• Document key processes, policies and customer contracts
• Diversify customer and supplier concentration
• Protect intellectual property and key registrations
• Ensure employment contracts include appropriate restraint and confidentiality clauses

Understand the sale structure

The two main ways to sell are:

• Share sale: the buyer purchases the company that owns the business. Contracts, employees and licences usually transfer automatically. This is often preferred by sellers for CGT reasons.
• Asset sale: the buyer purchases specific assets and may cherry-pick what they want. This is often preferred by buyers because it avoids inherited liabilities.

Small business CGT concessions can significantly reduce tax on a share or unit sale, but eligibility rules are strict. Planning early with an accountant and lawyer is essential.

Prepare for due diligence

Vendor due diligence means getting your own house in order before a buyer asks. Typical areas include:

• Financial and tax records for the last three to five years
• Customer and supplier contracts
• Lease agreements and property valuations
• Employee records, awards and entitlements
• IP registrations, licences and IT systems
• Litigation, disputes and regulatory correspondence

Having these prepared in advance speeds up the sale, reduces buyer risk and supports a stronger negotiating position.

When to get advice

Exit planning overlaps accounting, tax, legal, commercial and sometimes insolvency advice. The earlier your advisory team is involved, the more options you retain. At DNA Advisory, we help owners assess readiness, model tax outcomes, clean up financials and work with lawyers and brokers to structure the deal.

The information in this article is general in nature and does not constitute legal, financial, taxation or accounting advice. It is not tailored to your specific circumstances. Before acting on any information, you should obtain professional advice relevant to your situation.