Long Before the Sale: Laying the Foundations for a Successful Exit

• Start succession planning at least twenty-four months before a sale. Many of the most valuable tax, structural and ownership decisions must be made well before a letter of intent is signed. Early preparation preserves options and can significantly improve after-tax outcomes. 

• A business is worth more when it can operate without the owner. Buyers pay for transferability, not potential. Strong management, documented processes, diversified customer relationships and reduced owner dependence can materially increase business value and sale attractiveness. 

• A successful exit is about more than completing the transaction. Clear family governance, defined succession objectives and a disciplined post-sale wealth strategy are essential to preserving and transferring wealth across generations. 

Most Australian private businesses change hands once in an owner’s lifetime, yet most owners do so unprepared. Industry research estimates that roughly 60,000 Australian businesses are in the hands of retirement-age owners with no succession plan, while research on founder transitions suggests that owner handovers fail or underperform at two to three times the rate of ordinary management changes.¹ Our work with business-owning families points the same way. Succession remains the weakest link in Australian private wealth.  

The sale process often begins with an unsolicited approach. The owner, flattered and a little tired, engages. By the time advisers are assembled, the buyer has leverage, a letter of intent (LOI) is on the table and the planning window has closed. The headline price may look good, but the after-tax outcome and the wealth retained by the family are usually less than it could have been. 

After fifty years of advising business owners, we have learnt that a sale's after-tax outcome is largely decided before completion. The habits formed during the first two years after the sale shape the decades that follow. For this reason, our succession work starts at least twenty-four months before an intended exit, not when the offer arrives. In our experience, five foundations separate well-prepared exits from the rest. 

Almost every high-value structural decision (entity and tax structure, ownership design, pre-sale transfers, contingency protection) must be made before a letter of intent is signed. After that, a reorganisation that needs two years of lead time can no longer happen. 

The same issues recur. An operating business may be held in a discretionary trust that cannot accommodate third-party investment. Assets believed to be pre-CGT may have lost that status because of changes in trust distributions. A family may narrowly miss the eligibility thresholds for small business CGT concessions without realising how close it was. At T−24 months, you can fix these issues. At T−3 months, they grow costly and can even derail the deal. 

In practice, the owner should complete structural and tax due diligence across the family group at least two years before an intended exit. This review should cover the entity map, the CGT status of each asset, distribution history, third-party interests and intra-group loans. Any remediation or improvements to structures, policies or systems can then happen free from the pressure of a live transaction. 

A purchaser pays for evidence, not potential, and due diligence is that test. Well before a sale, the owner should analyse the business’s track record and performance, document the explanations behind the financial results and build those insights into the succession strategy.  Above all, a clear view of how the business would run without the owner is fundamental. A simple test applies. Could the business trade for ninety days without you, and could you prove it in due diligence? 

Reducing owner dependence, normalising the financials, documenting processes, building management depth and handling customer concentration are wealth planning, not housekeeping, because each item flows straight into the price. 

Relationships are often overlooked. A founder’s bankers, key customers and suppliers deal with the person, not the office, and those relationships do not transfer by inheritance. A written relationship-transfer schedule, listing the twenty relationships that matter, who holds each today and the joint meetings planned with the successor, is one of the most useful documents an owner can prepare. 

There are several routes to an exit: a trade sale; a full or partial sale to private equity, which may offer a second payout when the investor later sells; a management or employee buyout; or a transfer within the family. Each route suits different objectives. Yet most owners choose the route first, often simply by responding to whoever approached them. 

We work the other way round. First, define and rank what the sale needs to achieve for you, your family, your employees, your partners and your community. Then assess each route against those outcomes rather than against headline price. The result is a written Succession Mandate setting out the outcomes, route preference, timeline, walk-away terms and the owner’s intended post-sale role. 

Transitions are more likely to succeed when roles, decision rights and expectations are agreed early, and break down when they go unspoken. Our FaBrs™ framework covers fifteen factors spanning succession, governance, family members in and out of the business, remuneration, equity ownership, maintaining wealth and resolving conflict. We built it because these questions tend to come up together and a sale makes them all urgent at the same time. 

Two principles matter most. 

1. Distinguish the capacity in which each person is acting: family member, owner, beneficiary, director or employee. A sibling who runs a division, another who doesn’t and a parent who still signs off on everything may each be right in one capacity and wrong in another. Conversations about money rarely settle until those roles are clear.  

2. Agree in advance who will make each decision, in which forum and on what evidence, before positions harden. Every affected family member should hear the plan from the owner, not from competitors or the market. The next generation’s access to the proceeds should be phased in over time rather than granted all at once. 

The calls begin within days of completion, from banks, brokers, product providers, associates and friends in finance, bringing product offers, private deals and investment opportunities. Investing in the first ninety days is the most common post-sale mistake and often the most expensive. In this period, waiting is almost always the right call and it works best as a rule rather than a resolution: a written policy that no investment decision is made until a strategy, investment policies, a risk management plan, performance indicators and clear accountabilities are in place. 

The first six months are for making the proceeds safe, provisioned and boring. Practically, this means pre-agreed policies on cash spreads within counterparty limits, quarantining the completion-year tax liability and treating earn-outs and rollover equity as the concentrated positions they still are. After that, run the wealth as a new enterprise with a strategy, a governance structure, an operating rhythm and management reporting. A succession event shifts value from active risk to passive risk, and the owner must now govern the second as carefully as the first. 

It is the combination of these, not any one of them, that puts the family’s next business, preserving and managing its wealth, on secure foundations. Without them, owners face sales-driven, conflicted, short-term advice. The adage holds: to fail to plan is to plan to fail. This is where long-standing, experienced and professional counsel matters most. Its value lies less in finding the next opportunity than in standing between the owner and quick decisions, FOMO and financial terminology that can make a capable owner feel out of their depth. 

• Can you clearly state, in your ranked order, what you want and require the sale to achieve? 

• Could the business trade for ninety days without you and could you prove it? 

• Is your ownership structure right not only for a sale, but for managing the wealth that follows and for your intergenerational objectives? 

• Do you know, within a defensible range, your after-tax proceeds under your preferred route? 

• Has every family member who will be affected heard the plan from you? 

If you can answer fewer than four of these with confidence, the foundations are not in place yet, and that is why you should start planning twenty-four months prior to selling. 

If a sale or transition lies within the next two years, or has taken place within the last two, the time to move is now. We welcome a confidential conversation with a Cameron Harrison Partner. The earlier that conversation takes place, the more of what the business has built remains with the family, for this generation and the next.