It is not news that many small business owners keep poor books and records, and these record-keeping habits can be problematic when a business is for sale. For example, in a cash-based business, owners pocketing money instead of recording it on the books may find themselves forced to sell a business based on what is recorded, not what is actually made. This means that your business could be worth much more than you will be able to get for it.

To avoid this trap, plan ahead and have at least one full year of reported records before you try to sell. The latest 12-month results are the primary factor when a buyer is evaluating a business because purchasers are most concerned with what the business is doing currently. However, 2 or 3 years reflecting your full potential are preferable because they will help reassure a buyer that your business is worth what you are asking.

If you need to sell right away there are other ways you can prove to a buyer that you are doing more business than your books reveal. A buyer can contract to buy the business subject to verification of your takings. From this verified turnover he can then evaluate your consumption of supplies and products for the conditional contract time and estimate from your past purchases, which you have paid for, if the turnover you have structured your selling price on is correct. There are a number of problems with this route -- it takes more time; a buyer may not want to dig for this information; and if you are not honest with the ATO, a buyer may wonder if you're being up front about the business you are selling.