By Nigel Hall & Mark Wadhams of BGS
Statistics compiled by the Australian Bureau of Statistics indicate that only 21% of SME’s actually achieve a sale, that’s just 1 in 5!
This results in;
- Businesses being closed and the knowledge, value created and jobs getting lost
- The owner keeping on working far longer than they planned.
- Underfunded retirement plans.
Conversely, when surveyed 4 out of 5 small business owners expect to sell their business as part of their retirement planning.
Thanks to the Baby Boomer generation currently around 70% of small and medium-sized businesses are owned by people aged 45 and over. This means that over the next 10 to 15 years an unprecedented amount of business will come to the market for sale and the rules of supply and demand mean that values are likely to be impacted.
According to a Pitcher Partners and Swinburne University report. Succession Reset: Family Business Succession in the 21st Century. the outcome will most likely be that by 2020 a significant number of baby boomers will have or will be in the process of transferring ownership of their business. In Australia, the estimated value of these businesses is around $3.5 trillion.
I don’t know about you but I sense a lot of disappointed business owners in the near future.
As a result (and this is important ) buyers will have a far greater choice on the investment they do or do not make and in all likelihood they will choose the best and least risky businesses to invest in.
So if you want to be 1 in 5 that succeed in selling your asset you will need to have a plan and if you intend to sell in the next 10 years you should be ready NOW
Here is why;
- Timing- You cannot control the marketplace.
Timing can mean whenever the market cycle for your industry is on the upward trajectory, interest rates are low, banks are lending and buyers are looking.
It is imperative to seek your buyer when the outlook for sales and growth in your business are positive and are likely to remain so but unfortunately, too many owners see this as a time to milk the business. This can be an expensive mistake, put simply if you do not leave something on the table for the buyer you are unlikely to see the top value in a sale, if you achieve a sale at all.
- Looking attractive (low risk) to buyers – This takes time so doing it now makes sense.
Sellers see all the benefits of their business but buyers see RISK … To be attractive you need to look less risky than the other guy so having a business management system that takes YOU the owner out of the process of doing business is imperative. Systems, processes and management systems, ideally online, give buyers confidence that the success of the investment is not dependent on the seller. This is just one example of de-risking your business to make yourself more attractive and get top dollar when your sell.
- Having a strategic approach to finding your ideal buyer.- Getting on ‘their radar’ is about planning and the right approach.
In a crowded marketplace, the traditional selling process leaves your asset hidden amongst the countless other online website adverts. Strategic selling is the process by which you seek out your ideal buyer based on what is in it for them. A good business broker will be proactive in the sales process and make contact with companies and investors where your services and products add value to their clients. These buyers will see you as low risk and value you far higher than the buyer browsing online ever will.
In short if you want to have a maximum value sale it pays to have an exit plan and be ready ALWAYS.
Subscribe to our newsletter on how to maximise your business value and get a free report your business’s value!
BuyGrowSell is an Accredited Exit Planning company focussed on helping business owners maximise their value on exit, through a structured strategic approach to business sales.