Planning for the day you leave your business is very important. Whether you decide to sell up, retire or leave due to health reasons, having a plan in place can make this transition easier.
A good succession plan will help your business transition smoothly to the new owner. By planning your exit early, you can maximise the value of your business and help it to meet future needs.
Make sure your succession plan is achievable by setting a realistic timetable and measurable milestones that you can stick to.
A succession plan should include:
- information about your business – business name, logo, owner’s name, business address and ABN
- succession section – skills gaps, training, succession time and hand over
- finances section – value of the business, retirement payment, sale details, buyout details, taxation
- supporting documentation – business name registration certificate, ABN/CAN registration, GST registration, insurance papers, lease papers, will, etc.
To help you get started, download a succession plan template and guide.
If you’re planning to sell or close your business, it is a good idea to make sure your financial records are in order. While it is a legal requirement to keep records of your business transactions, it will make the selling or closing process easier if your records are tidy and up-to-date.
In order to value your business prior to selling, you will need to prepare a range of business information including:
- Your financial statements (for the last 5 years if possible) – such as cash flow statements, debts, annual turnover, and profit and loss statements
- Details of physical assets – such as machinery, buildings, equipment, and stock
- Details of other assets – such as goodwill towards the business and intellectual property (any designs or ideas that you have protected through copyright)
Buyers may ask if they can value your business independently, which means you will need to hand over your business documents, including your financial records.
If you need help to prepare your business documents, it is a good idea to talk to an accountant or business advisor.
Before you decide to sell or close your business, you will need to make sure you have copies of all legal documents such as:
- business name registration certificate
- Australian Business Number (ABN) registration
- Australian Company Number (ACN) registration
- Goods and Services Tax (GST) registration
- insurance papers
- lease papers
- partnership agreement
- buy-sell agreement
- retirement payout agreement
- contracts relevant to the succession
- will and testaments.
Top 10 tips
Are you thinking about selling or closing your business? We have put together 10 tips to help make the process easier:
- Develop a succession plan – having a plan in place will help your business transition smoothly to the new owner.
- Seek professional advice – it is important to seek legal advice to discuss your options before you decide to sell or close your business.
- Decide on the value of your business – if you decide to sell, talk to an accountant, business advisor or business broker on how to value your business.
- Keep your business records in order – organised and up-to-date business records can help the selling or closing process run more smoothly.
- Tell your employees early and keep them informed – it can be a difficult or stressful time when a business is closing or being sold, so open lines of communication are important.
- Inform your suppliers and customers – if your business is closing, tell your suppliers the date from which their services are no longer required and let your customers know to minimise their inconvenience.
- Pay employee entitlements – whether you sell or close your business, you will need to pay out entitlements such as outstanding wages and accrued leave.
- Talk to your accountant or financial advisor about tax issues – tax obligations can be complex and difficult to understand so it is a good idea to seek advice.
- Transfer your business – if you are selling or closing your business, you will need to transfer or cancel your business name and and cancel your ABN.
- Tell the ATO – you must let the ATO know if you close or sell your business.