PKF Australia

Accountants and Business Advisers

Pre-sale Planning and Preparation

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Alastair Richards


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Pre-sale Planning and Preparation

The sale of your business can be one of the most significant decisions you can make. The business is often a family’s most valuable asset, and often has also been a huge part of a family’s life over many years. It is therefore important that the sale process runs as smoothly as possible and also generates the largest return.

In order to achieve this, we strongly recommend starting to plan and prepare for the sale well before the intended sale date. Below we discuss some of the key components which you should consider as part of this planning process.

Stage 1 – Assessment of your business

It is vital that your business is assessed to identify areas of weakness or where there can be improvements made. It may be possible to perform this assessment in-house, but unless your team has the necessary skills and time to perform it, we recommend engaging an independent third party which specialises in pre-sale planning and due diligence.

The assessment should cover the following areas:

Financial records

  • At least three years of financial records for the period before the date of sale should be prepared and kept up to date;
  • Prepare budgets which are reasonable but not overly optimistic – often a buyer will assess budgeting accuracy;
  • Maintain detailed schedules to support year end balances (for larger businesses this should be monthly);
  • Monthly management accounts should be kept up to date, trying to minimise adjustments in subsequent months due to errors or corrections;
  • Identify non business-related items (expenses, income, assets and liabilities) and move these out of the business;
  • If there are multiple businesses being operated from the one company, consider separating them and putting each into its own legal entity; and
  • Identify related party transactions, in order to ensure they are on an arm’s length basis going forward.


  • Identify the value drivers of the business, this will allow management to focus on these drivers and thus improve the value of the business; and
  • Determine an indicative valuation range as well as the valuation metrics which are used in determining the range, thus giving shareholders an idea of what their business may be worth if the valuation drivers can be improved.


  • The assessment should consider the appropriateness and compliance with tax matters over at least the three years prior to the planned date of sale. The assessment should cover, Company Tax, GST, FBT, WorkCover, as well as Payroll Tax. It should also assess whether appropriate records have been maintained to support and substantiate each of the above, as well as ensure all necessary compliance requirements have been met.


  • Key staff should be identified. Often key staff will need to be informed of the sale process as a purchaser may wish to interview them and may also include their employment and incentivisation as part of the terms of purchase;
  • Depth of management should also be considered, as a purchaser will wish to know how many of the key tasks are distributed amongst the management team or whether they are concentrated within one or two individuals; and
  • Systems and processes are to be considered as part of the assessment. The stronger the processes and systems in place, the greater the reliance can be placed on the financial reporting system and the increased chance of management picking up any errors early.


  • Relationships with suppliers and customers should be assessed, including whether appropriate contracts are in place, and the key terms within these. Exclusive rights in contracts may also be of benefit or even a selling point;
  • Concentration of suppliers and customers should be considered. Often a diverse customer base will be preferred, as well as multiple suppliers providing the same inputs, thus reducing any reliance on one or a few customers or suppliers. Where this is not possible, appropriate contracts should be put in place;
  • A pipeline of customers showing gradual conversion to actual customers will also be beneficial. 


  • A full compliance and regulatory review should be performed. This would address regulations for the states and countries of operation, as well as industry specific regulations.

Stage 2 – Action plan

Now that the matters have been identified, it is key that each is addressed. Some matters may be more important than others, therefore these should be focused on first; with the less important matters being resolved subsequently. It is also vital that processes are put in place to ensure that once a matter is resolved, that it remains resolved.


A selection of the key matters to consider when planning to sell your business have been included above. This is not an exhaustive list but provides a good base to start. We recommend seeking professional advice and assistance where you and your team don’t have the necessary skills or don’t have time to perform it as thoroughly as it should be.

We also wish to reiterate, that it is much better to inform a potential investor or purchaser that there was an issue, but it has been rectified and thus should not have any impact on the sale price; rather than the purchaser finding out about it during their due diligence process and either walking away from the deal or requesting a discount to the price. It should also be noted that many professional investors consider the planning and preparation for sale to be so important, that they start this phase even before they make the initial acquisition or investment. So please keep in mind, how important this planning and preparation phase is.

If you would like to discuss this further, please contact me or one of my colleagues.


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