A new survey has found that 70 per cent of Australia’s Baby Boomer business owners plan to exit their businesses in the next decade, yet less than half of them have undertaken strategic planning to ensure a successful exit.
The survey, conducted by Chartered Accountants and business advisory firm William Buck to measure the level of exit readiness of more than 2,500 owner-managers in Australia and New Zealand, found that almost 50 per cent of business owners born between 1946 and 1964 planned to exit their business in the next five years, and 70% in the next decade. But despite this, less than half had initiated a plan for this such as valuing their business or planning for capital gains tax.
“Over the next five years we’ll see a flood of businesses on the market and competition for a buyer is likely to be tight,” Chair of William Buck’s national Corporate Advisory focus group, Manda Trautwein, says. “Preparation will be key and our advice is that business owners start preparing for the sale of their business three to five years ahead of when they’d like to sell.”
Trautwein goes on to offer the following advice:
Know your value
“An early strategic valuation and vendor due diligence will enable owners to determine the key value drivers of the business and identify the areas that will impact on its sale value. Given a three to five year lead time, owners will have time to work with their advisors to design an action plan which may focus on areas such as restructuring, tax planning, building management teams, diversifying revenue streams and/or closing down loss making divisions.”
Begin thinking about your market strategy early
“With a clear strategy in mind, it will be easier to identify potential buyers, especially competitors who may see the dual benefit of expanding their business and removing a competitor. Targeting potential buyers early and understanding their needs and future requirements will enable the business owner to strategically position their business to the demands of the market.”
Be aware of the tax consequences“Understanding the tax consequences of a sale is vitally important. All too often the profit of a business sale is diminished due to an unexpected capital gains tax bill. It’s heartbreaking for many owners who’ve worked their whole lives in their business. A well thought out tax strategy should form an integral part of the overall exit planning process and it’s important to know up front if your corporate advisor has access to the necessary tax expertise.”
Don’t neglect personal finances
“With the business acting as the primary asset to fund future income, it is imperative for the owner to pay attention to his or her personal finances. Most small business owners focus on accumulating wealth within the business and investing surplus profits back into the operations. Essentially, it becomes their only asset.”
Get the right advice
“Setting up an advisory board to provide objective and reliable advice is a great way to help you through the process of exiting your business. Your advisory board should meet with you on a quarterly basis to review your progress against your exit plan, provide advice and encouragement and most importantly, hold you accountable.”
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