Preparing a business for sale: the three-year runway
The price you receive, and how much of it you keep, is largely decided years before the business goes to market.
Updated October 2026
Most business owners sell once. The price they receive, and how much of it they keep after tax, is largely decided in the three years before the business goes to market — in how the earnings are documented, whether the lease has term left, and whether the capital gains tax concessions are still available.
This guide is for owners who expect to sell, hand over or step back within the next few years. It applies to pharmacies, practices and owner-operated businesses generally.
What buyers and their financiers actually look at
Most buyers fund a purchase with borrowing, which means the buyer’s lender has a large say in the price. Lenders and buyers focus on the same things:
- Normalised earnings. Profit restated to what a new owner can expect — with a market wage for the owner’s role and one-off items removed.
- Evidence for every add-back. An adjustment supported by records is accepted; one supported by a conversation is discounted.
- Trend. Steady or growing earnings are worth more than a higher figure that is falling.
- The lease. A buyer’s lender will want lease term, including options, at least as long as the loan.
- Owner dependency. If the customers, the relationships or the know-how leave with you, the business is worth less.
Three years out: establish the baseline
Start with an honest valuation. Not the number you hope for, but the number a buyer’s financier would support today, and the reasons for any gap.
At the same time, test your eligibility for the small business CGT concessions. They can reduce, and in some cases eliminate, the tax on a business sale — but the conditions are technical, and eligibility can be lost by the structure or by decisions made years before the sale.
| Concession | In broad terms |
|---|---|
| 15-year exemption | The whole gain may be disregarded if the asset was owned for at least 15 years and you are 55 or over and retiring, or permanently incapacitated. |
| 50% active asset reduction | Reduces the capital gain on an active asset by 50%, and can apply on top of other concessions. |
| Retirement exemption | Disregards gains up to a lifetime limit of $500,000. If you are under 55, the amount must be contributed to super. |
| Small business rollover | Defers the gain where you acquire a replacement active asset or incur capital expenditure on one. |
To access them you generally need to satisfy the basic conditions: be a small business entity (aggregated turnover under $2 million) or pass the $6 million maximum net asset value test, and the asset must satisfy the active asset test. Where the business is held through a company or trust, further tests apply to the people behind it.
Tax settings change on 1 July 2027
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received royal assent on 26 June 2026. From 1 July 2027 the 50% CGT discount for individuals and trusts is replaced by cost base indexation, with a 30% minimum tax on capital gains; gains accrued before that date keep the existing rules. The small business CGT concessions remain, and the turnover threshold for the 50% active asset reduction rises from $2 million to $10 million from 1 July 2027. The timing of a sale relative to 1 July 2027 now matters — see our explainer on the CGT changes.
Two years out: fix what a buyer would discount
- Extend or renew the lease so the term and options comfortably cover a buyer’s loan.
- Document the add-backs and stop running personal or related-party costs through the business.
- Produce reliable monthly management accounts so performance can be shown, not just asserted.
- Reduce owner dependency — train a manager, formalise processes, spread key relationships.
- Clean up the balance sheet, including old loans, Division 7A balances and assets the business does not need.
- Review the structure while there is still time to change it without losing concession eligibility.
The final year: prepare the sale
With the groundwork done, the last year is about presentation and process. A data pack that answers a buyer’s questions — and their lender’s — shortens the sale and protects the price. Decide early whether the deal will be an asset sale or a share sale, whether vendor finance or an earn-out is on the table, and how staff entitlements will be handled.
Different buyers suit different businesses. An employee or partner buy-in, a sale to family, a trade buyer or a group each has different funding, tax and timing implications. We model the options side by side.
After settlement
A sale converts years of work into a single payment, and the decisions made in the following months matter as much as the sale itself. Concession amounts may be eligible to be contributed to super, the proceeds need to be invested in line with your retirement plans, and your insurance, estate plan and structure all need to be revisited. Hedley Capital provides personal financial advice on those decisions.
“The value of a business is set long before it goes to market. The tax on the sale is usually decided even earlier.”
How we help
Our advisory division values the business and runs the sale readiness work; our accountants test and protect concession eligibility; our brokers understand what a buyer’s lender will need; and Hedley Capital plans what happens to the proceeds. One team, working backwards from the outcome you want.
Sources
- Australian Taxation Office — small business CGT concessions, basic conditions and the active asset test
- Chartered Accountants ANZ — Federal Budget 2026–27: proposed capital gains tax changes (May 2026)
General information
This guide is general information only and does not constitute personal taxation or financial advice. Tax law, including the proposed capital gains changes, may change. Obtain advice specific to your circumstances before acting.
Full licensing, remuneration and complaints information for each of our divisions is set out under Licensing & disclosures.
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