Business Sale Proceeds Calculator

This calculator answers what a vendor actually receives, which is a very different question from what the business is worth. It starts with the agreed price and separates out any earnout or deferred component, because only the upfront portion is available on settlement day and the deferred part is a forecast rather than a receipt. From the upfront amount it repays the bank debt secured over the business, which happens automatically out of the purchase money rather than being optional, then adds back your shareholder current account, which is money the company owes you and is the line vendors most often forget. Broker and legal fees come off, and then the calculator applies your own probability estimate to the earnout instead of counting it at face value, because the target usually has to be met by a business you no longer control. Finally it deducts tax on depreciation recovery, which arises when assets sell for more than their tax book value and produces a real cash bill that surprises people at completion. The result is three numbers that matter in sequence: net cash at settlement, total after deferred payments arrive, and total after tax. Deal structure drives the tax outcome heavily and share sales and asset sales are treated very differently, so this is a planning tool rather than tax advice.

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The Price Is Not The Point

Most vendors negotiate hard on the headline number and then discover that a surprisingly small share of it reaches them. On the worked example, a business sells for $1,200,000.00 and the vendor ends up with $868,200.00, which is 72.35% of the price. The missing $331,800.00 went to the bank, the broker, the lawyers, the accountant, Inland Revenue and an earnout that may not fully arrive.

None of that is unusual and none of it is anyone behaving badly. It is simply the difference between a valuation conversation and a settlement statement, and it is worth knowing before you agree a price rather than after.

Worked Example: $1.2m Becomes $868,200

Take the defaults. The agreed price is $1,200,000.00, of which $150,000.00 is an earnout payable later if performance targets are met. That leaves $1,050,000.00 payable at settlement.

The bank is repaid $280,000.00 out of the purchase money. The shareholder current account of $95,000.00 is money the company owes the vendor, so it comes back and adds to the proceeds. The broker takes 5% of the full price, which is $60,000.00, and legal and accounting come to $18,000.00.

Net cash at settlement is therefore $787,000.00.

The earnout at a 70% probability adds an expected $105,000.00, taking the total to $892,000.00. Then $85,000.00 of depreciation recovery is taxed at the 28% company rate, costing $23,800.00, leaving $868,200.00.

The bottom table matters as much as the total. If the earnout pays in full the vendor gets $913,200.00. If it pays nothing they get $763,200.00. That is a $150,000.00 range on a deal that was negotiated as a single number.

The Shareholder Current Account Cuts Both Ways

This is the line most often missed, and it is usually good news. If you have left money in the business over the years, whether as unpaid drawings, funds you injected or profits you never took, the company owes you that money and it is normally repaid at settlement. On the example it adds $95,000.00 to the proceeds.

It works in reverse just as forcefully. An overdrawn current account, where you have taken more out than the company owed you, is a debt you owe the company. That has to be cleared at settlement, reducing your proceeds, and it can also carry tax consequences of its own. If you are not certain which way your account sits, ask your accountant before you agree terms, because a six-figure overdrawn account discovered at completion is a genuinely unpleasant conversation.

Depreciation Recovery Is Real Cash

Vendors often assume that because New Zealand has no general capital gains tax, selling a business is largely tax free. That belief survives right up until the completion accounts arrive.

If you have claimed depreciation on vehicles, plant, fit-out or equipment, and those assets sell for more than their adjusted tax value, the previously claimed depreciation is recovered and taxed as income. It is not a paper entry. It produces a tax bill payable out of the proceeds, and on an asset-heavy business it can be substantial.

This is one of the main reasons vendors prefer share sales and buyers prefer asset sales. In a share sale the company and its asset base stay intact and the depreciation position is generally not disturbed. In an asset sale the assets change hands and the recovery crystallises. The price should reflect which structure is agreed, and if a buyer insists on an asset purchase it is entirely legitimate to price that difference into the deal.

Treat The Earnout As Upside

An earnout defers part of the price and makes it conditional on the business performing after you have left. That is a reasonable way to bridge a valuation gap, and it is also the part of the deal most likely to disappoint.

The reason is structural rather than adversarial. The target usually has to be hit by a business under new ownership, which may reprice, restructure, change staff or invest differently, all for perfectly sound reasons that happen to affect the measure your payment depends on. You will typically have no control and limited visibility.

Practical protections are worth negotiating: define the performance measure precisely and in a way that cannot be manipulated by accounting choices, secure reporting rights so you can see the numbers, agree what happens if the buyer sells the business again during the earnout period, and prefer a measure closer to revenue than to profit, since profit is easier to influence.

Then plan your own affairs on the assumption that it might pay nothing. On the example that is the difference between $913,200.00 and $763,200.00, and only one of those numbers is safe to build a retirement on.

Zero-Rating And Why It Matters

Where a business is sold as a going concern between two GST-registered parties, and both parties agree in writing that the supply is of a going concern with the purchaser intending to carry it on, the supply can be zero-rated for GST.

That is worth attention. On a $1,200,000 deal, GST at 15% would be $180,000 that the buyer funds at settlement and claims back later, and that the vendor collects and pays over. Zero-rating removes that entire circulation of cash. The requirements are specific and must be recorded in the sale and purchase agreement, so it is a drafting point rather than something to sort out afterwards.

Value First, Then Proceeds

The right sequence is to establish what the business is worth, negotiate the price, then work out what you keep. Our Business Valuation Calculator handles the first step and our EBITDA Calculator normalises the earnings a buyer will actually price off.

Running this page early is still worthwhile though, because it changes what price you need. A vendor who requires $900,000 to fund their next step needs a headline price well above that, and knowing the gap before negotiations start is considerably more useful than discovering it at settlement.

Related NZ Business Sale Calculators

• Business Valuation Calculator: what the business is worth, which is the step before this one.
• EBITDA Calculator: the earnings measure most buyers price from.
• Capital vs Revenue Account Calculator: whether a gain is capital or taxable revenue.
• Depreciation Recovery Calculator: size the recovery figure this page taxes.
• Company Solvency Test Calculator: before distributing the proceeds out of the company.