Many business owners put their heart, soul and life savings into their business in the hope that when it comes to selling the business it will provide them with their retirement nest egg. The reality for most small business owners is that their business won’t fund their retirement and unfortunately, they often realise this a little late. Do you recall the Global Financial Crisis (GFC) back in 2007/8 and the resultant share market decline in 2008/9? Many small business owners were planning to retire before the GFC hit and wiped substantial value off their businesses.If your business is your superannuation, then you need to ask yourself the following questions:
- How much do I need when I retire?
- What is the business (really) worth now?
- How do I close the gap between the two?
Once you have identified the Business Value Gap you can manage the business value drivers that will assist you in achieving your desired sale price. Some of the criteria that a potential buyer is looking for that will drive your business value include:
- Efficient, scalable business systems / processes – ensure all your systems are documented, implemented, followed and continuously improved.
- Not owner reliant – the business needs to be able to run without you.
- Motivated, loyal, well-trained staff – can they keep the business running if you are not there?
- Know your numbers and benchmark performance – buyers look for strong sales and increasing profitability over the past three years.
- Loyal customers – do your customers speak highly of you, do you have repeat sales and what does your future revenue look like?
- What are the business risks and how are they managed?
- Do you have a succession plan in place do ensure the business will operate once you exit?
Remember potential buyers want to pay as little as possible for your business. It’s important for you to start planning now on how you are going to exit so you can maximise the sale price. Keep in mind that selling your business is no different to selling your house. With a little preparation, tidying up and planning you increase the probability of achieving a more desirable sale price.
