Business Succession

Like most Gold Coast business owners you have worked hard over the years to grow and nurture your business into what it is today. For many owners their business is their most valuable asset and naturally when the time comes to exit, you want to receive the maximum return possible.

If you plan on exiting your business during the next five years either to retire or to move on to your next venture there are some important considerations to take into account now.

  • What is my business worth?
  • How much do I need to sell my business for in order to fund my retirement lifestyle / next venture?
  • How salable is my business?
  • Who will buy my business?
  • When do I want to sell my business?

The importance of these questions is explained further below:

What is my business worth?The current market value of your Gold Coast business is often a shock to many business owners, this is because unfortunately, the blood, sweat and tears of years of business ownership does not translate to increased business value. The most common method of valuing a Gold Coast business is using the capitalisation of profits methodology which as the name suggests uses the annual profits of the business as the main driver behind the valuation.  In recent times, the bottom lines of many businesses have suffered which has the effect of reducing the value of the business.  The other significant driver of the valuation is the perceived level of risk to potential purchasers of the business. Your businesses value is significantly impacted by this  level of risk and there are many strategies that can be employed to reduce this reduce and therefore add measurable value to your business.

How much do I need to sell my Gold Coast business for in order to fund my retirement lifestyle / next venture? $500,000, $1million, $5million? Put simply, the answer will depend on your current assets and liabilities, and how much you would like to spend each year of your retired life.  We use a tool called Business Value Gap to accurately determine the sale price that your business needs to achieve in order to fund your retirement or next business venture. Knowing now how much you need to sell your business for is very confronting for most business owners especially if a significant gap exists between the current market value of the business and the value they need to sell for in order to fund their retirement. As confronting as this may be, they are better off knowing in advance as it gives them the option to take corrective action.

How sellable is my Gold Coast business? A tidal wave of businesses for sale is expected to occur over the coming ten years with the impending retirement of the “baby boomer” population. This oversupply of businesses is likely to have two major effects for business owners looking to sell. 1 – Oversupply of anything tends to lower the sale price as it becomes a buyers market. 2 – Buyers will pick and choose between a huge variety of opportunities and select only the best businesses with the most potential and least business risk.  Knowing how sellable your business is gives you the opportunity to implement strategies now to reduce business risk and make you business more attractive to potential purchasers when the time comes to sell.

Who will buy my business? Do you intend to sell all of your business to an unknown party or perhaps transfer ownership to your sons or daughter? Are there key employees within the ranks who would be willing to buy into the business that could be nurtured into management roles? Can they afford to purchase the business and am I willing to offer vendor financing or put in place an earn out agreement? Often businesses sold internally (to family or staff) achieve a higher sale price as the perceived level of risk to the purchaser is lower than if the business were sold on the open market. Internal sale of businesses is also an excellent strategy for overcoming the problem of selling in a very competitive business sales market.

When do I want to sell my business? Having time on your side is critical for two major reasons. 1 – It enables you to implement strategies aimed at increasing the value of your business by improving profitability and cash flows and reducing business risks. 2 – It enables you put in place an exit strategy based on an internal sale. Earn out agreements are a popular way for businesses owners to sell their business internally to staff or family (who may not be able to afford to buy the business in a traditional manner) and effectively receive a premium price for the business over a number of years recouped from the profits of the business.Vendor financing is also another effective method for the cashing out of your business over the an extended term which requires some careful planning.

Please take the first step and contact one of our consultants on (07) 5585 8555 for an obligation free consultation.