The vast majority of small businesses across Australia can be classified as 'lifestyle' based. This means that they were set up by the founder with the aim of providing a great product or service to generate a certain amount of profit and to provide the individual with a great lifestyle for the future. The key word here is 'future', as, after all, there has to be an endgame if the whole project is to make sense. As time goes by and the owner gets older, he or she must be able to convert their efforts into a cash windfall so they can, indeed, enjoy that lifestyle into retirement. Does this sound familiar to you, and if so, isn't it about time that you worked on your succession plan?
Ready for Sale?
You certainly want to ensure that your business is saleable and has a great value whenever you pass it on to somebody else. In truth, you never really know when that ideal day will arise. This is why it's so important to create a succession plan now so that you can bring it into play as and when needed, or whenever the time is right. Remember, the objective is to ensure that your business can continue to operate without you, while you disappear off into retirement.
Best Exit Strategy
Some people may choose to hand the business over to an existing business partner or somebody who has been actively involved in the business all along the way. Others may choose to bring in a business broker and advertise the company in the open marketplace. If you choose the latter option, then you certainly need to ensure that all your books and records are up-to-date and that you prepare the business properly before planning the sale.
Ultimately, your objective may be to get as much money as you can for the business, whilst reducing your tax liability as you exit. Often, the business will be valued according to an industry multiple to reflect the amount of goodwill you have built up over the years. You may need to bring in a valuation expert to come up with the most accurate figure that is most likely to help you sell.
However, you will also need to talk carefully with your accountant as you look at your likely tax liability. You may be able to take advantage of special relief rates when you do sell your lifestyle business, so long as the paperwork is presented properly and the numbers are calculated carefully. Contact a company that offers accounting services to learn more.Share