4 tips for business owners who are thinking of selling in fy24
EOFY is 'so yesterday'.
Now is the time to switch your focus to B.O.N.F.Y - Beginning of New Financial Year.
EOFY has again passed but you can't let this annual 'festival' sap your energy and distract you from the bigger game - the future plan for you and your business.
Of course you need to manage the day-to-day, Whether you are thinking of selling in FY24, or have no intention to sell any time soon, you'll also need to look forward to FY24 and the longer term, say the next 5-10 years. So in the spirit of B.O.N.F.Y;
- What are you going to do differently this year to make your business more valuable, more profitable, easier to sell, easier to keep (starting about now)?
- What do you need to help deliver the changes, the improvements, the new direction?
- For that matter, what exactly are your objectives?
I talk openly with a lot of owners about what they want to do with their business and their personal aspirations. While most of these conversations start on the basis of "I think I need to or should sell" a lot end up contemplating other outcomes, like staying in the business because;
1. That's really what they want to do, or
2. More time is needed to make it more valuable and saleable by ''working on it'' rather than "in it", or
3. More time is needed to really think about what they really want to do.
Based on all those conversations I've compiled my top 4 tips for owners to work on right now to make FY24 and future years better - whether you are going or staying.
MANAGEMENT ACCOUNTING
Management Accounting aka better understanding what your business numbers mean and how they can help you make better day to day decisions.
Get your Accountant or bookkeeper to provide regular Management Accounts that help you understand exactly where and how your business makes or loses money and what levers you have to change the performance. Then set up a regular review process with the management accounting information. For this process to be successful you must include;
- Reviewing current performance against prior year’s results and ideally a well-prepared forecast, and
- Meaningful ratio and trend analysis. I've looked at thousands of sets of financial reports and I understand why it’s easy to glaze over them. The "oh sh#t moments" and other ''pearls of wisdom" don't exactly jump off the page. I proposed another way in an article I wrote Time to move on from the A - Z Chart of Accounts read it here http://bit.ly/2yx6iBK.
By doing this you will make the compliance based financial (tax driven) reports more helpful in monitoring and driving your behaviour and the day to day operational performance of your business and employees.
The options to start range from the simple (http://bit.ly/2yx6iBK) to the complex (completely restructuring your chart of accounts and financial reporting). The key is just to get started.
FORECASTING
Forecasting aka performing better in the future by better understanding what drives the financial and operational performance of your business now.
Prepare a meaningful forecast for FY24, and ideally further. It takes time and will (and should) challenge you. But have a crack anyway. You'll get better at it, but more importantly the process of sitting down and forcing yourself to think about what actually drives the numbers will provide you with powerful insights and breakthroughs on how to better run your business. Get good help if you need it but as owner it's your responsibility and your results.
KNOWING THE MARKET VALUE OF YOUR BUSINESS NOW
Do you know the market value of your business today?
Getting an independent, expert assessment will help you better make many important decisions in future years, whether your planning to sell sooner or later.
The longer you have been in business and the more the outcome of the sale is important for your personal financial wellbeing the more you need to know "the number". But get the market valuation or appraisal on your business from someone who is active in valuing businesses for sale or acquisition. You want to understand what the business would sell for now, even if you aren't planning to sell. This way you get a 'base line' for personal planning and, with future valuations, a comparison point for measuring whether your business improvement efforts are working.
PAY for good advice to make your business more profitable, more valuable and easier to sell
You won't have all the answers,
Because you probably haven't sold a business before, and because the eventual sale of your business means a lot personally and financially you need to get independent, expert advice.
Whether you are going or staying in your business think about the other advisors and mentors you need to help you get where you want to go;
- Is your Accountant (and/or bookkeeper) active, engaged and up for the job?
- Do you need a business coach (or mentor) to set the plans and monitor performance?
- Do you need an advisory board to help 'steer the ship'?
- Do you need marketing & advertising help to grow sales or to build a valuable client database?
- Should you join a networking group or a 'circle of excellence' with business peers to 'share the load' on the stresses and day to day challenges
If you are committed to selling in the next 5 years then you'll need a quality business sale advisor and/or exit planning advisor.
In closing.
- Tax Advice is not the same as Business Advice.
- Good Business Advice creates 'good' tax problems, which need good Tax Advice
- So here's to some 'good' tax problems in the festival d'EOFY about 12 months from now.
If you want to discuss what to do next with your business contact me directly via https://www.kerrcapital.com.au/contact-us