Latest News April 2021

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Sounds too good to be true?

Sometimes you get an offer that seems irresistible, almost too good to be true….if you don’t just jump in but stop to investigate further you may just find it’s not true! It has been brought to our attention by a client that there are some potential buyers for your business that you really need to think three times about before selling to.

If you are thinking of selling your business, would you accept part cash and part shares (in the entity that will be buying your business)? If you think you wouldn’t think carefully if somebody dangled an 8-10x multiplier of profit to you if you would just walk away. If you think you might sell then please read on.

What due diligence would YOU as the seller do on the buyer? We are all familiar with the buyer wanting lots and lots of information from you the seller, but what do you ask for in return?

If, for example, your clinic was worth $1m and you took 60% as cash and 40% as shares, then what would happen if the buyer went insolvent? Well the good news is that you’d keep the 60% cash – $600k – as this is yours and nobody can take it away from you. However what would happen to that $400k tied up in shares in the insolvent company? The most likely answer is you would never see another $ from it!

Remember that if you are not offered 100% cash then you are only really getting paid for part of your business. You may own many shares, but if you have not done a lot of research into the buyer then you may well end up with shares that are worth nothing. This has happened a number of times in the past in other industries and there is no reason it won’t hit the veterinary industry too.

One of our clients informed us that there is a new group out there buying veterinary practices right now that left a number of dentists with very empty pockets and loss of shares when their venture in the dental market went insolvent. They have just re-formed another entity moved onto the next thing – veterinary practices!

Think twice about any great looking deal particularly when all the cash is not upfront. If a buyer making such an offer is asking you to show all your finances and dirty laundry, remember, you are investing as much in their venture as they are in yours! So in these cases you would have to ask them to show you exactly the same information for their business – it’s an “I’ll show you mine if you show me yours” scenario. 

Thought about your 2021 tax bill yet?

This is the time of year that we start looking at ‘tax planning’ with our clients. One of the most important aspects of this is estimating how much tax you will need to pay on your 2021 tax return. We know that most of you have had a better year than previously, but with all the good there is also a little pain and that will come in paying your tax bill. If your profit has gone up this year then you will not have paid enough in tax instalments during the year and will likely need to be paying more tax than usual.

For many of you this extra tax won’t fall due until this time next year, so it could be easy to spend your surplus cash now and then end up stuck for cash next year when you need to pay your tax. Make sure you have factored this in to your current spendings!

There are some common things you can do that reduce profit and therefore tax:

1. Pay extra into superannuation – $25,000 including super guarantee for the year. For some of you there is an option to put in more than this as a tax deduction (most importantly your superfund balance needs to be under $500k and then the amount you can add depends on how much you put into superannuation in previous years)

2. Buy equipment that you are needing – each item up to $150k is fully deductible but remember it reduces your profit by the amount you spend so you only get a % of the amount you spend paid by the ATO.

Dog Tales!

As the naughty dogs in the office we can say that the dog people have won! Nurten, who was actually a CAT person, has decided to leave us and move to a different field of work. In her defense though she still used to give us tickles and treats even though she preferred cats. If Nurten was doing your bookkeeping, don’t worry as mom and dad have it all in hand and are searching for a great replacement as we type. We promise we didn’t scare her away, we are far too friendly for that – she has decided bookkeeping is no longer for her….ouch that veterinary paperwork must really be as yucky as diet dog food. A big thank you to Nurten for looking after us and her clients and we do hope she enjoys whatever work she chooses to do (but we doubt she’ll ever find an office as doggy as ours, and as of yet, we have never heard of a cat friendly office)