Baby boomers – a threat to your wealth!

Ascend Partners counting coins
What is your business worth? – An introduction to Valuation
September 24, 2018
ascend partners business exit
What to do if you can’t find a buyer for your business
October 23, 2018
Ascend Business Partners closed sign - business exit

Many business owners have more wealth tied up in the business than they do in their house. Given that 70% of business owners plan to use their business as the primary source of retirement, this asset needs to be leveraged to maximise its value to help owners achieve their wealth goals.

 

There is no doubt that, as the average age of small business owners increases  and baby boomers continue to reach the age of retirement, the age-old laws of supply and demand will come into play. There will be an increasing supply of businesses available for acquisition, and a diminishing number of interested buyers.

 

In this marketplace business owners will need to present their business in an appealing, professional manner to stand out from the competition and achieve the maximum return. These are the two likely scenarios you will face when you’re trying to sell your business in a crowded market place:

 

  1. YOU MAY NOT BE ABLE TO SELL YOUR BUSINESS: Some business owners will not be able to sell their businesses. In fact 90% of businesses are not even ready for sale!
  2. YOU MAY HAVE TO SETTLE FOR A LOWER PRICE: Other business owners will not be able to achieve the sale price that they want for the business. This is likely to directly impact your wealth and retirement plans.

 

It stands to reason that the more you can sell your business for, the more you will have available for your retirement. That is why you need to understand the business sales process and work on a plan to maximise the attractiveness of your business to potential purchasers. To achieve a successful sale a lot of the work needs to be  done 12-36 months before putting your business on the market!

 

What makes a business attractive & worth more?

 

Buyers look for a return on their money. The higher the perceived return on investment the more attractive the business. And of course the more attractive the business the more buyers are prepared to pay.

 

Attractiveness will be relevant to the type of buyer

 

Attractiveness will be relevant to the type of buyer and the reason they are buying.

 

When an owner/operator considers buying a business they are essentially buying themselves a job. The average spending of these buyers would likely be $100,000 to $1,000,000 and any business for sale over this category may be unattractive.

 

A multinational or large company that buys a business for strategic reasons will rarely spend under $1,000,000. A multinational would not look at a business unless it had enough profit and upside to justify the stringent due diligence, legal and accounting fees.

 

Within the owner/operator category there are essentially two types of people. These include buyers which are purchasing for leisure and hobby reasons and those which are buying to “get ahead”.

The former will be made up of people that are reasonably well off and are either in the twilight of their careers or are looking to take it a bit easy. They are essentially looking at buying a job in an

industry which they enjoy working in. They want good profits and a job that is not stressful in a situation where they don’t need to work too hard.

Owner/operators that are buying to “get ahead” will be after maximum returns. Their choice of industry is dependent upon growth, profitability and their experience. They are not concerned about working hard or long hours as long as there are solid returns.

 

What can you do to do to maximise your business value?

Knowing that a lot of preparation needs to go into your business sale in order to achieve the best result is a first step. In order to get started, you can educate yourself on the process by

  • Reading some self-education and self help literature,
  • Use business planning and management software, and
  • Appoint an advisor who is an expert in the field of business exit planning.

 

Self Education & Self Help

Books: There are many books on the subject of Exit & Succession.  You could consider any of the following books that will help you make informed decisions about your future:

 

  • “7 Steps to REFIRE” Greg Johnson
  • “Built to Sell” by John Warrillow
  • “The Strategic Exit” by Martin Checketts
  • “The E Myth Revisited” by Michael E. Gerber

 

Business Planning and Management Software

In terms of practical self help solutions. Ascend Business Partners has a range of software that will help you to improve the value of the business. This includes titles on Business Planning, Job Descriptions, Policies & Procedures, Performance Review, Information Memorandum Writer and more. We also have a range of free online tools that you can use to assess your business readiness and attractiveness for sale or exit. Check them out at: http://ascendpartners.com.au/exit-readiness-calculator/

 

Appoint an Advisor

You may need to appoint a number of advisors throughout the process of leaving your business. Some of the areas you may need professional help with include:

  • Exit planning advisor
  • Financial advisor
  • Business valuation
  • Tax planning
  • Legal practitioner
  • Human Resources specialist
  • Capital raising professional
  • Business broker
  • Investment banker

 

We can help you by co-ordinating the entire exit planning process and engaging the right advisor at the right time for the right price.  It is critical that you start the process from 12-36 months prior to selling the business.

Ascend Business Partnersare experts in helping business owners build their business and supporting them during the sale, exit or transition process. Our Managing Partner, Greg Johnson, is a Certified Practicing Accountant, Certified Exit Planner and Business Broker. Our focus is on creating exceptional personal and business outcomes for business owners by assisting our clients to plan, design and implement their ultimate exit and succession strategy.

 


Contact Ascend Business Partners today on 03 8794 7777 or ascend@ascendpartners.com.au to have a discussion about your business and personal goals. Or simply book a free 1-hour “Time to REFIRE” workshop with Greg!

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