Straight answers on what a business is worth, how a sale works and what can go wrong, written for New Zealand owners.
Plenty of business sales in New Zealand don't fall over at the offer. They fall over later, when the buyer's accountant finds a gap in the figures, the landlord won't sign the lease across, or a key staff member hears the news from someone else and walks.
Read the guideThe year before you sell often does more for your price than the sale itself. Buyers pay for what they can see in the accounts and what they can check in due diligence. A year of preparation gives you time to change both.
Read the guideSelling a business is a sequence of checkpoints. Each one has to clear before the next can start, and most delays happen when something that should have been sorted early turns up late.
Read the guideThe question owners ask first is rarely about price. It's "who's going to find out?"
Read the guideOnce you've agreed a price, everything else that matters ends up in the sale and purchase agreement. How long you'll stay to train the buyer. Whether you can open up down the road. What happens if the landlord says no. Who pays for stock, and how it's counted.
Read the guideDue diligence is where a buyer checks that the business is what you said it was. Their accountant goes through your figures line by line. Their lawyer reads the lease and contracts. Their bank wants to see it all too.
Read the guideSelling privately saves the broker's fee. That's real money, and for some owners it's the right call.
Read the guideThe price on the agreement isn't what you keep. GST treatment, depreciation recovery and how the price is split between goodwill, plant and stock all change your after-tax result, sometimes by a lot.
Read the guideAsk three people what your business is worth and you'll hear three numbers. Your accountant has one for the balance sheet. A mate in the same trade has one from a sale he heard about. You have one that covers the years you've put in.
Read the guidePull out last year's accounts, enter a handful of figures, and we'll email you an indicative price range for your business.
Read the guideYou can get surprisingly close to a realistic price on your own, provided you look at the business the way a buyer will. That means starting from profit, not sales, and being honest about the risks.
Read the guideEvery method answers the same question in a different way: what would a buyer pay for this stream of earnings, or these assets? Which method fits depends on the size of the business, how it makes money and who needs the answer.
Read the guideA multiple is shorthand for risk. It tells you how many years of earnings a buyer is willing to pay up front for a business. Secure, transferable earnings attract a higher multiple. Earnings that depend on the owner, one customer or a short lease attract a lower one.
Read the guideTo a buyer, your business is worth the profit it will hand them each year, multiplied by how confident they feel that profit will keep coming. Everything else is detail.
Read the guideThey sound interchangeable. In New Zealand, they're two different things, prepared by different professionals for different purposes.
Read the guideSome business figures have to stand up to scrutiny. A departing shareholder's lawyer, the Family Court, Inland Revenue or a bank will want a valuation prepared by someone independent, using recognised methods, with every assumption written down.
Read the guideEverything you share here stays between you and our brokers.
