Selling a business in New Zealand: how to prepare for a sale
The best time to start preparing for selling a business is when you start it. Life rarely works that way, so the next best time is three to five years before you want to sell. That gives you time to work on the things that increase value, build a track record a buyer can rely on, and sell on your terms rather than in a hurry.
Not sure where your business stands today? Try our Would you buy your own business? scorecard for a quick health check, then use this guide to plan what to work on.
Get your financial records sale-ready
Buyers, their accountants and their banks will all want to see your financial records. They need to be up to date, accurate and easy to follow.
Keep the accounts current: monthly bookkeeping, bank reconciliations and GST returns done and filed on time.
Tidy up the balance sheet: write off old debts and obsolete stock, remove assets that no longer exist from the asset register, and deal with any overdrawn shareholder current account. In a share sale the buyer will want it repaid, and in an asset sale it needs clearing before the company is wound up, or it can create a tax cost.
Be up to date with Inland Revenue: file any outstanding returns and clear tax arrears, so they don't hold up due diligence or settlement.
Cut unnecessary expenses: it improves profit and shows a well-managed business.
Resolve disputes: settle any outstanding legal matters. Buyers prefer a business free of unresolved problems.
Record all income: a buyer, valuer or bank can only value the profit they can see in the accounts and tax returns. Cash that doesn't go through the books can't be counted, so it adds no value, and claims of extra income will usually be discounted. If income hasn't been fully returned in the past, talk to us about putting that right through a voluntary disclosure to Inland Revenue before you go to market.
Reduce reliance on the owner
In many owner-operated businesses, the owner holds the key customer relationships and much of the know-how. The more a business relies on one person, the higher the risk for a buyer, and the lower the value. To reduce that reliance:
build a team that can run the business day to day, with the authority to do it
introduce key staff to your main customers and suppliers
document how the business runs, from quoting to payroll to month-end procedures.
If you’re planning to hand over to family or your management team, see our guide to business succession planning.
Secure your customers, contracts and staff
Earnings are worth more when they're secure.
Customers: spread your customer base where you can, and put key relationships into written agreements.
Premises: review your lease term and rights of renewal, and whether the lease can be assigned.
Staff: make sure all staff have written employment agreements, and that leave balances are calculated correctly under the Holidays Act 2003. Errors are common and can be costly to fix.
Assets and intellectual property: make sure trading names, domain names, websites and social media accounts are owned by the business, not by you personally.
Compliance: keep licences, health and safety records and Companies Office annual returns up to date.
Procedures: review your procedures, and document them if you haven't already.
Confidentiality: plan when and how staff, customers and suppliers will be told about the sale. News of a sale getting out early can unsettle all three.
Plan the structure, price and timeline for selling a business
Share sale or asset sale
A business run through a company can be sold either as shares in the company or as a collection of business assets. Each has different tax, legal and practical consequences.
Share sale | Asset sale | |
What is sold | The company, including its history | Agreed assets and goodwill |
Past liabilities | Stay with the company, so pass to the buyer | Generally stay with the seller's company |
Staff | Employment continues with the company | Employment with the seller ends. The buyer offers new employment, which staff can accept or decline, and some workers have a right to transfer on their existing terms |
Contracts and leases | Stay with the company, but change-of-control clauses in leases, bank facilities and key contracts may need consent | Usually need to be assigned to the buyer, with the other party's consent |
Tax | Your gain on the shares is usually capital. The company keeps its tax history, which the buyer will price in | The company may face tax on depreciation recovered and stock. Purchase price allocation and the GST going concern rules apply |
Prepare a sale pack
A well-prepared sale pack (often called an information memorandum) answers a buyer's first questions and shows the business is well run. It usually includes a business overview, three years of financial statements with normalised earnings, year-to-date figures, an asset list, a lease summary, the staff structure, key customer and supplier information (anonymised at first), and your reasons for selling. Ask buyers to sign a confidentiality agreement before you release detailed information.
Know your numbers before you set a price
Understand the realistic value range, the asking price you'll go to market with, and the lowest price you'd accept. A valuation gives you an evidence-based starting point; our article on how business valuation works explains what drives it. Building some room to negotiate is sensible. However, an asking price the financials can't support will put off serious buyers, and a business that sits on the market too long starts to look like it has problems.
Know what you'll actually walk away with
The sale price isn't the cash in your hand. Before you commit, work through:
tax on depreciation recovered, and on stock
GST, including whether the sale can be zero-rated as a going concern
repaying business debt
broker commission, and legal and accounting fees
how the proceeds come out of the company. Money the company owes you on your shareholder current account, and the share capital you paid in, can generally be repaid tax-free. Capital gains, such as on goodwill, can generally only be paid out tax-free when the company is wound up. Anything else is usually a taxable dividend. If your current account is overdrawn, the amount you owe the company has to be cleared, usually by offsetting it against what the company pays out to you. Where the tax-free amounts aren't enough to cover it, clearing it by dividend or shareholder salary creates a tax cost. The order and method of winding up matter.
Purchase price allocation
In an asset sale, the price has to be split between stock, plant and equipment, goodwill and any property, and the split changes your tax bill. Amounts allocated to plant and equipment above its tax book value can be taxable as depreciation recovered. Agree the allocation in the sale agreement, using market values. If it isn't agreed and the sale is $1 million or more, you have three months from settlement to set it, or the right passes to the buyer. Our article on purchase price allocation explains how it works.
A practical timeline
When | Focus |
3–5 years out | Get a valuation, identify what's holding value back, tidy up the financial records and start reducing reliance on the owner |
12–18 months out | Address customer and lease risks, update employment agreements, and review structure and tax with your accountant |
6–12 months out | Prepare the sale pack, choose a sale method (broker or private sale), and confirm your price expectations and expected net proceeds |
During the sale | Respond to due diligence promptly, keep the business performing, and work with your lawyer and accountant on the sale agreement |
After settlement | Complete the handover, file final tax returns, wind up the company if appropriate, and plan for the proceeds |
Negotiating the sale agreement
The price is only part of the deal. These terms decide how much risk you keep after settlement.
Restraint of trade and warranties
You'll usually agree not to compete with the business for a period, and give warranties about the accounts, assets and compliance. Negotiate a restraint area and period that are reasonable for the business, and a cap and time limit on warranty claims.
Your lease and personal guarantees
Assigning the lease to the buyer doesn't automatically release you, or anyone who guaranteed the lease. Ask the landlord for a release as part of the assignment.
Earn-outs
If recent trading has been affected by the economy, an earn-out can bridge the gap between your price and what a buyer will pay up front. Part of the price is paid later if the business hits agreed targets. Earn-outs need careful drafting:
Define the measure: set out exactly how profit or revenue will be measured, and on what accounting policies.
Protect yourself: the buyer controls the business after settlement, so include information rights and some protection against decisions that undermine the target.
Separate the handover: keep any payment for your handover or ongoing work separate from the earn-out. If earn-out payments depend on your personal effort, part of them could be treated as taxable income rather than capital proceeds for goodwill.
Get tax advice: deferred payments can bring the financial arrangements rules into play (see the lowest price clause below).
Vendor finance
If you're asked to leave part of the price owing, take security over the business assets, and set the interest rate and repayment terms out clearly in the agreement.
The lowest price clause
Where part of the price is paid well after settlement, such as under an earn-out or vendor finance, the tax rules can treat part of the price as interest. A lowest price clause records that the agreed price is the lowest price the parties would have agreed if it had been paid in full on the day the agreement was signed. It helps make sure no part of your price is taxed as interest. Make sure your lawyer includes it.
Late settlement
Standard agreements provide for default interest and costs if settlement is late, and a settlement notice process if delays continue. Check the default interest rate, and make sure the buyer's finance and other conditions have realistic dates, so you're not left running a business you've mentally handed over.
Common mistakes when selling a business
Leaving it too late: a business prepared for sale over several years is worth more than one sold in a hurry because of ill health or financial pressure.
Minimising profit: a lower reported profit reduces your tax bill, but it also reduces the price a buyer will pay.
Involving advisers too late: once the sale agreement is signed, changing its terms is difficult and expensive, and can push settlement out. Get advice before you sign, not after.
Not knowing your net proceeds: owners often focus on the headline price and are surprised by the tax, debt repayment and costs that come out of it.
How we can help
Whether you're in Nelson Tasman or elsewhere in New Zealand, we can help you prepare for a sale with confidence, including:
a valuation, so you know where you stand today
a clear plan of what to fix to increase value before you sell
normalised earnings and financial information that stand up to due diligence
a sale pack that answers buyers' questions
advice on sale structure, purchase price allocation, GST and tax, so you know what you'll keep
support through due diligence and settlement, working alongside your lawyer and broker.
Thinking about selling in the next few years?
The first step is a conversation about your goals and timeframe. Call us on 03 544 4772 or email info@businessstudio.co.nz.
Last reviewed: 7 November 2026
Disclaimer: The information in this article is general in nature and is not personalised business, legal or tax advice.
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