Beginning this new Financial Year right to increase business value

When is paying more tax a good thing?

Fast forward to 30 June 2025. You've left your Accountant's office having completed your last minute (EOFY) tax planning. Maybe you purchased a new laptop or paid in some extra super.  Tick.

Has to be done. But it's also 'rear view mirror' thinking that doesn't move the dial on the value of your business or increase the ease with which you could sell when you're ready.

Way more important is the road ahead. What's coming at you? What changes can you make to increase increase profits* to;

1. Enjoy now, and
2. Later when you sell for a higher price. 

*The price of this success will be paying more tax. 

So back to now. Putting aside what you can’t control (e.g. interest rates, helpful and impactful government business policies) what will you do differently this coming financial year?

What are your objectives for this coming financial year?

 Maybe you want a;

1. More profitable business.
2. Less ‘you-dependent’ business.
3. Set of actionable steps to give you the confidence that you have a sellable business, if, and when, you decide to sell.
4. Realistic understanding of what your business is worth (today), and how much you could bank if you did sell.
5. More travel and leisure time with family.

This thinking can be challenging and therefore very easy to put-off. But if you take some time right now to prioritise your objectives, there will be a reward when the EOFY (End Of Financial Year) circus rolls around next year. 

Embrace the spirit of BONFY (Beginning Of New Financial Year) right now, today. Dig deep and really challenge yourself with big questions about what to do with your business, or how it can work better for you.

Here are my FY25 tips to help increase value and build a more sellable business.

These tips;

1. Are doable now, with just a little external expertise. You, as owner, just need to make the call.
2. Deliver benefits for owners planning to sell and those wanting to continue to own the business for a few more years.  

KNOW THE MARKET VALUE OF YOUR BUSINESS TODAY!

Get an assessment of market value for your business if you were to sell it now, so you can more more informed decisions about your exit plans.

Better still get an understanding of how sellable your business is. This goes beyond a simple valuation and looks at;

1. What are the likely selling costs and timeframes.
2. What barriers there are to selling in your timeframe and how to fix them.
3. If your timeline allows, what could you do to increase likely selling value.
4. How you compare with similar businesses currently for sale. 

The longer you have been in business and the closer you are to your ideal selling timeframe the more you need to know "the number". 

If you aren't selling, a market valuation now is a baseline for assessing whether your future efforts to increase value are actually working.

GET MORE VALUE FROM your BUSINESS numbers (AKA MANAGEMENT ACCOUNTING) 

You can’t sell a business based on traditional tax returns. Why?

Information is ‘rolled up’ to fit in with the professional conventions of calculating tax and conforming with professional and compliance guidelines. You know the ones I mean; they have expenses neatly listed A to Z, i.e. Accounting! It’s not wrong. But the annual (once a year, usually lagging real-time by months) aren't that helpful when it comes to making decisions about how to make your business operate more profitably and efficiently. 

I've looked at thousands of sets of financial reports and it’s really easy to glaze over them. The "oh sh#t moments" and other ''pearls of wisdom" don't exactly jump off the page. 

These soul-less numbers on a page need to be interpreted and reformatted to help you, the owner, make high impact decisions, and give buyers a real story about what makes the business tick and where the opportunities are.

And the storyline is usually much easier to read from your management accounting numbers (i.e. Xero, MYOB, Reckon et al), assuming you have set-up a meaningful chart of accounts. That is, assuming you get your Accountant or Bookkeeper to provide regular (monthly or quarterly) Management Accounts that help you understand where and how your business actually makes or loses money, and what levers you have to change the performance. 

An effective management accounting review process might include analysis of;

1. Current performance (say a month, a quarter) against the same period in the prior year.
2.  ‘Year to date’ performance against forecast.
3. Performance in different parts (Business Units) of your business (I regularly see management accounts where Revenue is split by the different products or customer types (helpful) but is then rolled-up into and appears as Total Revenue in the tax return (unhelpful).
4. Expenses from highest to lowest (starting at the top i.e highest is where’ll you get really meaningful insights). 
5. Key ratios and trends. 

START FORECASTING & PLANNING NOW to perform better in future

Prepare a meaningful forecast for FY25, maybe even FY26 and beyond. 

It does takes time and it 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. But as owner, it’s your responsibility.

PAY FOR GOOD ADVICE TO MAKE YOUR BUSINESS MORE PROFITABLE, MORE VALUABLE & EASIER TO SELL

You don't have all the answers, 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 leaving or staying in your business, think about the independent 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 five years, you'll need a quality business sale advisor and/or exit planning advisor. 

Remember, Tax advice is not business advice

In closing, BONFY is a great opportunity to set your business up for success. Good business advice creates 'good' tax problems, which require good tax advice - not the other way around.

So here's to bigger 'good' tax problems in the festival d'EOFY about 12 months from now.

If you want to discuss anything related to this article or what to do next with your business, book a call with me.