Buying & Selling a Business FAQs
Whether you are buying your first business or planning your exit after years of ownership, the financial and tax implications are significant. Getting the structure right can save you hundreds of thousands of dollars in tax and protect you from hidden liabilities. Here are the questions we hear most often.
How do I value a small business for sale in Australia?
The most common method for valuing a small business is a multiple of earnings, typically applied to Seller's Discretionary Earnings (SDE) or Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA). You start by normalising the financials to remove one-off expenses, owner perks, and non-recurring items. Then apply a multiple that reflects the industry, size, growth prospects, and risk profile of the business. Other methods include asset-based valuations for capital-intensive businesses and discounted cash flow analysis for businesses with predictable future earnings. A professional valuation provides credibility in negotiations. At BVM, we prepare independent business valuations for clients across Sydney.
What is an earnings multiple and how is it calculated?
An earnings multiple is a factor applied to a business's maintainable earnings to determine its value. For small businesses in Australia, multiples typically range from 1.5 to 4 times SDE or EBITDA, depending on the industry, size, customer concentration, and growth trajectory. A business with strong recurring revenue, documented systems, and low owner dependency will command a higher multiple. To calculate, take the average adjusted earnings over two to three years and multiply by the appropriate factor. For example, a business earning $200,000 in adjusted EBITDA with a multiple of 2.5 would be valued at $500,000. Our CPA qualified team at BVM helps buyers and sellers in Oran Park determine fair and defensible multiples.
What due diligence should I do before buying a business?
Thorough due diligence should cover financial, legal, operational, and tax areas. Financially, review at least three years of tax returns, BAS lodgements, profit and loss statements, and balance sheets. Verify that reported revenue matches bank deposits and ATO records. Check for any outstanding ATO debts, employee entitlements, or pending legal claims. Operationally, assess customer concentration, supplier agreements, lease terms, and staff contracts. Confirm that all licences and registrations are transferable. Review any intellectual property ownership and ensure there are no undisclosed liabilities. At BVM, we conduct comprehensive financial due diligence for buyers across South West Sydney to uncover risks before settlement.
What is the difference between an asset sale and a share sale?
In an asset sale, the buyer purchases specific business assets such as equipment, stock, goodwill, customer lists, and intellectual property. The seller retains the company entity and any liabilities not explicitly transferred. In a share sale, the buyer purchases the shares of the company, acquiring everything the company owns and owes, including any unknown or contingent liabilities. Buyers generally prefer asset sales because they can choose which assets to acquire and avoid inheriting hidden liabilities. Sellers often prefer share sales for potential CGT concessions and cleaner exits. The tax treatment differs significantly between the two approaches. Our team at BVM helps clients across Sydney structure the sale to achieve the best outcome for their situation.
How do the small business CGT concessions work when selling?
The small business CGT concessions can significantly reduce or eliminate capital gains tax when you sell your business. There are four concessions available. The 15-year exemption provides a complete CGT exemption if you have owned the asset for 15 years and are aged 55 or over. The 50% active asset reduction halves the capital gain on active business assets. The retirement exemption allows up to $500,000 of capital gains to be exempt if contributed to super. The rollover allows you to defer a gain if you acquire a replacement asset. To access these, your business must have aggregated turnover under $2 million or net CGT assets under $6 million. At BVM, we help business owners across Sydney maximise these concessions when exiting.
Do I need to pay GST when selling a business?
If you are registered for GST and selling business assets, GST generally applies to the sale. However, the sale of a business as a going concern is GST-free if certain conditions are met. Both parties must be registered for GST, the sale must include everything necessary to continue operating the business, and the parties must agree in writing that the supply is a going concern. If the going concern exemption does not apply, GST is charged on individual assets (excluding financial supplies and some other exempt items). The allocation of the purchase price between different asset categories affects the GST treatment. Our CPA qualified team at BVM ensures the GST implications are correctly managed for business sales across Oran Park.
How long should I plan before selling my business?
Ideally, you should begin preparing your business for sale at least two to three years before your intended exit. This gives you time to improve the financial performance, reduce owner dependency, document systems and processes, resolve any outstanding legal or tax issues, and build a management team that can operate without you. Businesses that are well-prepared for sale consistently achieve higher multiples because they present lower risk to buyers. You should also ensure your personal tax position is optimised to take advantage of the small business CGT concessions. Rushing a sale often leaves significant value on the table. At BVM, we work with business owners across Sydney on structured exit plans that maximise sale value.
What is a vendor finance arrangement when buying a business?
Vendor finance is where the seller lends part of the purchase price to the buyer, who repays it over an agreed period after settlement. Typically, the buyer pays 50% to 70% upfront and the remainder over one to three years with interest. This arrangement benefits buyers who may not have the full purchase price or cannot secure traditional bank lending. It benefits sellers by attracting a wider pool of buyers and potentially achieving a higher sale price. The loan is usually secured against the business assets and may include performance conditions. If the buyer defaults, the seller can recover the business. At BVM, we help structure vendor finance arrangements for clients across South West Sydney that protect both parties.
Need Help With This?
If you have questions specific to your situation, our team can provide tailored advice. We work with over 100 small businesses across Sydney and hold a 5.0 Google rating.
This information is general in nature. It does not constitute professional advice tailored to your specific circumstances. Tax laws change frequently and individual situations vary. We recommend consulting with a qualified accountant before making financial decisions based on this information. BVM Accountants & Business Consultants, Oran Park NSW 2570.