Preparing to Sell a Mid-market Business

Selling a mid-market business (a business with a turnover of between $5 million and $100 million) is a complicated project and in our 10 years experience, it requires far more time in preparation (12-18 months minimum) than for the actual transaction (3-6 months).

When selling smaller businesses such as a corner café, newsagent, hairdressers, there is not a lot to do – you need to be able to verify sales, the lease of premises and a few other fairly simple details – very similar to when selling a property. However, with larger businesses, it is more complicated, and if you take that approach in larger businesses (which is nothing like selling a property) you will either be sorely disappointed or in many cases unable to sell at all. Mid-market businesses are far more complicated and have many more moving parts – all of this needs to be considered and prepared for sale. Unlike property, you cannot just buy and hold, sit back and wait until the value increases and then sell easily at a weekend auction. Mid-market business assets need to be actively managed, constantly reviewed and fine-tuned and the preparation for the sale of a business is vital.

In most cases, we would recommend targeting a strategic buyer – a buyer who has a reason to pay more, a buyer for whom your business is more valuable, who has more synergies and who is looking to scale – this will nearly always get you the best possible sale price for your business. The issue, however, is that these buyers are professional and fussy: they are experienced buyers and know what they are looking for.

The key to preparing a mid-market business for sale is twofold – firstly, an Insights report so you understand exactly where the business is currently at and what needs to be done to maximise value and prepare for sale. Secondly, review all of the items the buyer is going to look at (reverse due diligence) – most buyers will provide a long list of items to review such as financial, legal, employment documents – our typical due diligence list is 12 pages long. Ideally, all of this should be reviewed, updated and any gaps resolved long before we get anywhere near a buyer.

To find out more, check out the podcast interview on preparing your mid-market business for sale.

Craig West

Managing Director | Succession Plus

Craig West is a strategic accountant who has over 20 years’ experience advising business owners. His background as a CPA in public practice, provided invaluable experience in the key issues of concern to business owners. Following 6 years of study to gain two masters degrees, Craig focused on Capital Gains Tax (CGT) for business sales advising on strategic management of tax issues. This experience formed a very strong view that business owners (and often their advisers) were unprepared and unaware of the steps required to prepare a business for exit.

Craig now acts as a strategic mentor for mid-market business owners and has written four critically acclaimed books on employee incentives, succession planning, asset protection and exit strategies. Craig has conducted numerous seminars and keynote presentations throughout Australia & internationally, including adviser education programs for the Institute of Chartered Accountants and CPA Australia.