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Just like our record month in settlements ($5M) last month, this month we have found a new record. Unfortunately though, this is a record we wish we didn’t have to encounter and is an enormous issue facing many business owners when it comes time to sell. 

We are talking about the black economy - “cash” revenue and wages that are "unreported" to the ATO.

This can be an incredibly frustrating issue to talk about as people share many different opinions on “what is right and fair."

We don’t want this article to offend anyone, and whilst some of you may assume that as business brokers we don’t have a position on this topic, you are mistaken, our opinion is very strong and very clear.  

Our commitment is always to the clients and business owners we interact with.  We want to ensure the transferability of a business sale is smooth for every new owner and that profitability is sustainable whilst operating under ethical workplace practices.  

According to the ATO, over 85% of Australian’s believe it’s unfair to use cash to avoid paying their fair share of tax. They also stated recently a huge increase in complaints made by the Australian public.

“The ATO received nearly 60,000 reports of suspected tax evasion, the black economy or illegal phoenix activity from 1 July 2018 to 31 May 2019, which is a 42% increase on the volume of referrals in the same time period in the previous financial year.”

On the other hand, we have encountered many business owners who cite the key reasons for needing cash in their business:

  1. Cash makes their business viable (for them).

  2. Essential employees cannot work over a certain number of hours “on the books”.

  3. They do not agree with how the government spends the tax.

Whilst we don’t necessarily disagree with the business owners' statement in point 3, we understand that many people who do the right thing (including employees) don’t have a choice, and find it irritating that one person gets to choose what amount of tax he/she pays (what turnover is declared) whilst the other does not.

Point 2, is perhaps the most concerning, in fact, one business owner described how his best employee was a single mum of three and received various financial support from the government (in other words, from the honest taxpayer), yet she was desperate financially. Even with working 45 hours per week on average and only declaring 15 hours per week, the employee could not keep up with the cost of living in Sydney and was getting herself further into credit card debt. In this instance, the business owner was not paying super or PAYG – so there is double-dipping from the business and the employee.

How truly big is the black economy? Are the ATO stats on this hugely understated? As business brokers, we assess financial accounts daily... and our stats tell us they are.

Just under 50% of businesses we encounter have a degree of cash, and this is not just restricted to the food retail industry. Also, keep in mind that we choose to only list around 10% of the businesses we review.

According to ABC News, 23rd August 2019:

“The black economy, people who are operating entirely outside the tax system, is estimated at $50 billion or 3 per cent of GDP. This is larger than Australia's entire budget deficit, which varied from 1.9 per cent to 2.4 per cent of GDP between 2015 and 2017.”


So what happens when one is selling or buying a business with a large cash component?

Our standard rule if you are looking to buy, is don’t do it.

If you are a seller, you would be prudent to normalise your financial accounts and transition your cash, payroll, bookkeeping, and reporting processes to ensure you are within ATO industry benchmarking and guidelines.

Whenever the word “cash” is used in the context of a business sale, the word is always whispered - just in case the ATO has a black ops snatch and grab team nearby?

Sellers take note if you are expecting that a buyer will recognise cash as part of the discretionary earnings, unfortunately, this is extremely unlikely in today's market. We have come across just 1 buyer in the last 18 months who was prepared to recognise, and actually preferred cash.  

We have recently finished a business review on what looked like a great business at face value, yet we uncovered an enormous amount of cash wages. 82% of the entire wages paid to employees were in cash.

They were clever enough to stay within ATO guidelines by taking huge director wages – so in some ways, they could argue that they are paying their fair share of personal tax. However, unfortunately, we have determined the business was not saleable.

The issue is also with transferability. If 82% of employees are suddenly confronted with a new owner who wants to pay them all properly, how many would stay? This would mean much lower net wages and no financial government support for some. The business sale will trigger enormous issues for the old owner, new owner, and employees. As an exercise, we made all the normal adjustments to bring their business above board and valued their business at $660,000.

The sad thing is, if they were to sell the business in its current state, the employees WILL leave, and be able to pick up the same “off the books” work at a similar business within walking distance.

The client was compelled to continue through our business review process - and we are pleased to see them start to make the necessary changes to their business despite another brokerage firm turning up with an agency agreement with an estimated price of $1M – to $1.5M.


If you are buying a business and you wish to proceed despite there being some cash in the business, you can instantly improve equity in the business by sticking to the following rules.

  1. Find a business where there are non-essential expenses that could be removed. 

  2. Do not “pay” for the cash in your offer. Pay only for what can be validated with tax accounts.

  3. Transition to reporting the cash and paying staff above board. Instantly the revenue will increase compared to the revenue you purchased.

  4. Your wages will likely increase proportionately also, so your bottom line may not be any better off.

  5. Offset the increase to wage expenses by removing non-essential expenses.

  6. You now have a business, with higher revenue and a higher bottom line.


This month we spoke to Abhishek Maharaj from who is a highly experienced and ethical SME Finance broker, to try and understand the challenges facing buyers when purchasing a business. Here are some of his best tips in obtaining the right finance, albeit simple he is surprised at how many buyers just don’t know where to start. 

1. Start by understanding your credit report. It is free and takes 24 hours to receive. It will highlight if there are any key issues. Credit reporting is far more sophisticated than it used to be. For example, now a late payment can be recorded, and with some lenders, this can constitute an automatic refusal.

2. Make sure your financial information is in order, sometimes, especially for lower amounts you may just be too difficult to service, and it’s easier to drop the case and move onto a higher value and more prepared client.

✓ Credit file information ✓ Financial supporting documents ✓ Business plan ✓ Personal resume

When writing a business plan, it does not need to be 50 pages long. As simple summary will do. The lender will also be forming an assessment on are you a good fit for the business. Can you demonstrate that you understand the industry, have a plan to maintain and grow the business and are capable of executing on your plan? They want to see there is a story behind why you are purchasing the business.

3. Most importantly, find the right finance broker, and think of them as trusted advisors. You should not be just a number to them. They should understand your financial capacity, risk profile, and be motivated by a long-term relationship with you.

4. Every broker has access to many different lenders, which can result in very different outcomes for the borrower. Always shop around.


Lenders will lend up to 50% of goodwill. This means you need 50% of the purchase price in cash or borrowable equity.

If you are using your home and you have $500k in equity, lenders will recognise up to 80% of this as borrowable equity. I.E. You could only borrow up to $400k.

Plant and equipment will be valued at “fire sale” prices, and lenders will lend up to 80% of the fire sale value. To speak with Abhishek contact

*Winquote is a recommended provider only. As a boutique firm, we like to deal with other boutique professionals. VBA will receive no commissions or referral fees.

We are currently in discussion with the following businesses. None of these businesses are listed for sale yet, and these Vendors are thinking of selling their business shortly:

1. Coffee Roaster Sydney 4.5 tonne per week $6M 2. Coffee Roaster Sydney circa 1 tonne per week $1.5M 3. Coffee Roaster Sydney circa 400kg per week circa $250k 4. Commercial shopfitting and design business Sydney circa $700k 5. Coffee Roaster Regional NSW and freehold circa $2M 6. George Street CBD retail franchise circa $500k 7. Gaming and Poker Machine Service circa $1M 8. East coast trucking and transport company circa $7M 9. Gluten-free cake manufacturing Sydney circa $170k 10. Household consumables distribution circa $1M 11. Steel fabrication circa $600k 12. Italian restaurant and past manufacturing circa $700k 13. Food manufacturing Woolworths products circa $4M

If any of these sound like they might suit you, please register your interest by sending an email to It is amazing what can happen off-market, and genuine interest can inspire sellers to take action before their business hits the open market.


Dear Sellers and Buyers, 


During September we settled $537,000 worth of businesses, congratulations to the sellers and buyers. Historically, September is a quiet month for sales, so we are pleased to see these transactions complete.


We are extremely excited and passionate about this new product. We believe it is a great solution to so many small businesses, where paying hefty broker commissions just does not represent a win/win.

We can’t wait to help business owners sell their business by providing them with a complete set of tools, processes, expertise, and access to a broker, just like they would have in a normal commission-based engagement but without the expenses.

We have just registered our business name and domain – which we’ll announce next month, and the new website will be up and running in just a matter of weeks. Watch this space!

We are doing some early market testing on this product. There will be 2 businesses listed on the VBA website next week. The first is a cake manufacturing business supplying to the café industry. It has a net profit of $100k, along with a $75k+ salary to the working owner. The second is a French restaurant in the inner west with discretionary earnings to the owner of $200k last financial year and the asking price will be under $150k!

Keep your eyes out for these!

Kind Regards, Daniel Kogan & Dan Levitus



Our mission is to transcend the standards of the business broker industry, and this means so much more than just selling businesses.

We would love for you to be part of our community.

From all of us at Vision Broker and Advisors, we really look forward to working with you.

Good luck, and make sure you have a look at our business for sale.


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