Selling a business is one of the most significant choices a business owner will ever encounter. Whether it’s a long-established family operation or a recently expanded enterprise, navigating the process demands careful planning, expert guidance, and a solid grasp of the tax, legal, and commercial environment. This article delves into the key concerns business owners face when preparing for a sale, concentrating on structural readiness, tax optimisation, timing, along with macroeconomic and industry-specific factors.

1. Business structure and sale readiness

Is your business sale-ready?

Many business owners operate with structures that were suitable initially—such as sole trader, partnership, trust, or private company—but may not be ideal when it comes time to sell. Buyers often prefer straightforwardness and legal transparency; complicated structures can add unnecessary challenges during due diligence.

Example:
A logistics firm structured as a discretionary trust with multiple beneficiaries experienced diminishing buyer interest due to the complicated ownership model. By restructuring into a clear corporate entity with defined shareholdings, it successfully sold within six months.

Thus, aligning your business structure with buyer preferences, typically a company limited by shares with well-defined asset ownership and a clean tax history, is advisable at least 2–3 years before planning a sale.

Clean up the balance sheet

Buyers closely examine assets and liabilities. Loans to shareholders, unnecessary assets, or related-party transactions can cloud the financial picture.

Steps to Take:

• Repay or clear shareholder loans.
• Write off outdated inventory.
• Dispose of redundant or non-performing assets.
• Resolve ongoing disputes or litigation, if feasible.

2. Tax planning: Unlocking value and minimising liability

Understanding the Capital Gains Tax (CGT) Landscape

Capital Gains Tax (CGT) often represents the largest tax burden when selling a business. Several small business CGT concessions, if utilised effectively, can eliminate or considerably reduce the tax payable.

The key CGT concessions include:

• 15-year exemption: No CGT if you’ve owned the business for 15 years, are over 55, and are retiring.
• 50% active asset reduction: Halves the capital gain on active business assets.
• Retirement exemption: Up to $500,000 of capital gains can be tax-free if contributed to superannuation.
• Rollover relief: Defer gains when selling one business and acquiring another.

Example:
A software consultancy utilised the 15-year exemption by ensuring the shares were held by an individual over 55 and that the asset was classified as active. Their $2.8 million sale was entirely CGT-free.

Important consideration:
These concessions are complex. Eligibility depends on factors such as asset usage, ownership duration, turnover thresholds (some rules apply to $2 million, while others involve a $6 million net asset test), and the specific business structure. Engaging a knowledgeable accountant early in the process is crucial.

Trust distributions and Division 7A implications

If your business operates as a trust or company, unpaid distributions or loans to beneficiaries/shareholders could trigger Division 7A implications, resulting in these being taxed as unfranked dividends.

Action items:

• Document and ensure trust distributions are paid.
• Review shareholder loans and confirm that repayments or compliant loan agreements are in place.

GST and stamp duty

• GST: Business sales may qualify as GST-free under the ‘going concern’ exemption if the buyer continues the business.
• Stamp duty: While not universally applicable, some states (e.g., NSW, VIC) impose stamp duty on business asset sales.

3. Timing the sale: Market, tax year, and life events

Timing within a tax year

Timing the sale, such as selling in June versus July, can greatly affect your personal tax return. Delaying a sale until the new financial year can provide additional preparation time, enable super contributions to be structured correctly, or offer a better window for tax planning.

Case in point:
A café sold in late June 2024 gave the owners little opportunity to implement superannuation strategies or prepay expenses. A sale just weeks later in July could have reduced their overall tax liability.

Economic and industry cycles

Industry multiples can vary with economic confidence, regulatory changes, and media narratives. Selling during a buyer’s market (when acquisition demand is high) can greatly enhance company valuations.

Example:
In 2022, childcare businesses experienced a significant surge in private equity interest driven by government subsidies and market consolidation trends. Owners who sold during this time achieved multiples of 7-9x EBITDA, compared to 4-5x just three years earlier.

Retirement and Health Planning

Many owners postpone making sale decisions, only to face urgent exits due to health concerns or burnout. Planning the sale several years ahead allows flexibility for negotiations, tax reduction, and grooming a successor or key employee.

4. Accounting and financial housekeeping

Normalising earnings

Buyers evaluate businesses based on ‘normalised EBITDA’—earnings adjusted for exceptional items, personal expenditures of owners, or non-recurring revenues/costs.

Action plan:

• Stop running personal expenses through the business.
• Identify and document add-backs transparently.
• Reduce reliance on key individuals, including the owner.

Updated financials and forecasting

Buyers will want:

• Financial statements prepared by accountants for the past three years.
• Year-to-date management reports.
• Forecasts demonstrating future growth potential.

Best practice:
Collaborate with your accountant to ensure records are accrual-based, account receivables/payables are aged, and accounts reconciled. Inaccurate or unclear financials can delay deals.

Due diligence preparation

Establish a virtual data room containing:

• Tax returns (company/trust/individual) from the last 3–5 years.
• Copies of important contracts (leases, supplier agreements, employment contracts).
• Asset register.
• Records of IP and domain ownership.

Tip:
Conduct your own “vendor due diligence” before entering the market to identify red flags prior to a buyer discovering them.

5. Legal and regulatory compliance

Contracts, IP, and licences

Make sure all contracts are:

• In the business name (not the owner’s name).
• Assignable to a buyer.
• Current and signed.

Additionally, verify that:

• Trademarks and domain names are registered in the business’s name.
• All government or industry licenses are current.

Employment law

Obligations regarding employee entitlements (such as long service leave, annual leave, redundancy, etc.) must be sufficiently addressed. Some buyers may require the seller to settle entitlements at the time of sale.

Compliance with modern awards has also become a focal point. In 2020, various hospitality businesses were embroiled in underpayment scandals that stalled sales and necessitated rectification.

Data and privacy laws

This is especially significant for technology businesses but applies to any company handling customer data. New Australian privacy reforms (which aim to bolster penalties and compliance obligations effective from 2024) may heighten buyer concerns about potential liabilities.

6. Technological, legislative and industry trends

The impact of AI and automation

Businesses that adopt technology (such as CRM systems, cloud accounting, and inventory management) are generally more efficient and appealing to buyers.

Example:
Two regional veterinary practices came to market in 2023. One relied on paper systems and lacked comprehensive records; the other employed cloud-based software, automated appointment reminders, and centralised record-keeping. The latter was sold for 20% more.

ESG and sustainability

Environmental, Social, and Governance (ESG) factors are increasingly influencing decisions made by private equity and institutional buyers. Sustainable practices, low emissions, and fair wages can enhance valuation or broaden the buyer pool.

Changes in law

Up-and-coming legal reforms—such as updates to superannuation contribution caps, identification rules for company directors, and enhanced enforcement by the ATO and ASIC—can impact how you prepare for a sale.

For instance:
The tightening of Division 293 superannuation tax thresholds in 2025 may make super contributions less appealing for high-income earners, altering some tax planning strategies leading up to a sale.

7. Emotional and legacy concerns

Letting go

Many owners underestimate the emotional toll of selling a business, particularly one nurtured over many years. This may result in overvaluation, confusion, or prolonging the process.

Family and Succession

If a family member purchases or takes over the business, considerations shift towards fairness, estate planning, and possibly staged handovers or vendor financing.

Example:
An agribusiness in regional NSW was sold to the owner’s son at a discounted price with a five-year earn-out period and coaching. This approach preserved family harmony while facilitating a generational transition.

8. Practical steps to take now

• Engage a tax adviser and lawyer 2–3 years before your planned sale.
• Get a business valuation to comprehend your business’s current worth and understand ways to enhance it.
• Groom a second-in-command to mitigate risks associated with key person dependency.
• Develop a buyer profile: Is your ideal buyer a competitor, private equity firm, customer, or family member?
• Start contemplating life after the sale. Retirement, philanthropy, consulting, or embarking on a new venture?

Selling a business involves multiple dimensions beyond just finding a buyer. It necessitates meticulous tax planning, legal and operational preparation, awareness of industry trends, and emotional readiness. The earlier you commence preparations, the more likely you will exit with a higher valuation, a smoother process, and a legacy to be proud of. Every exit is unique. However, with appropriate preparation, expert support, and a clear understanding of your business’s strengths and weaknesses, you can transform a potentially stressful transition into a strategic success.