A recent study of Family Businesses revealed that Australia’s ageing family business owners have a big problem. According to new research on the family business sector, 45% are actively planning to sell their businesses and 61.3% would seriously consider selling now. On top of this, 25.2% of family firms say they have been approached regarding a sale in the last 12 months. There is just one problem – these business owners, who control a large chunk of Australia’s $1.6 trillion family business sector, are simply unlikely to get enough from the sale to fund their retirement. To read more about this, please go to the original article “No exit for family business” that was sent to me by electronics expert Ray Keefe of Successful Endeavours in Melbourne.

With millions of baby boomers nearing retirement, thousands of businesses are about to be put up for sale in the next few years, which could result in an oversupply, forcing the price of businesses down. In a previous post, I discussed the impact on family businesses. The situation could possibly escalate to the point where some businesses end up closing up shop because they are unable to get a good price for their life’s blood, sweat and tears.

Small business owners should start planning at least three years before retirement to get the best possible price for a business. This is to ensure profitability is satisfactory, the risks that can be mitigated are addressed for the future owner and most importantly, the tax implications of a sale are properly considered and planned for.

5 Tips “How to get the top price for your business”

1. Understand HOW your business will be valued by the buyer(s). Business owners notorioulsy have an inflated view of what their business is worth, but an operating business is typically valued by applying a multiple to the earnings achieved by that business where past results are a guide to future earnings, with the multiple representing the perceived risk in the business. This is easier said than done. In our Business Mastery Platinum Program, we’ve shown people how to ensure this is done methodically and systematically – WITHOUT hiring an expensive business broker.
2. Look at it from the buyer’s POINT OF VIEW. All buyers are cautious and seek to assess the likely future levels of profitability and how much risk will be taken on to achieve that profitability. It’s often beneficial to engage a third party, such as an accounting firm, to undertake an assessment and valuation of your business. Ideally, they should act as if they are acting for a potential buyer with all the apprehension, doubt and cynicism that involves. This process helps determine readiness for sale by identifying issues which, if rectified, will increase the value of the business for sale. I don’t suggest you use a business broker to do this – remember his/her vested interest is to lure you into selling AT ANY PRICE so he/she gets a commission!
3. Identify risks to your future profitability. This is called Sensitivity analysis is the study of how the variation (uncertainty) in the output of a mathematical model can be apportioned, qualitatively or quantitatively, to different sources of variation in the input of the model. Put another way, it is a technique for systematically changing parameters in a model to determine the effects of such changes. That mathematical model is what I call Management By Metrics™ that are derived from your Pathways To Profits™. Typical risks you need to include are shown below. If not rectified, these factors could have a significant impact on the value of the business.

• Dependence on a few key customers and suppliers,
• Revenue streams not protected by contracts,
• Intellectual property which has not been protected,
• Insufficient diversification of products or services and
• Dependence on key employees who are not locked in.

4. Can the business operate without you? Most small business owners are very hands-on in their business. They hold all the key relationships with customers and suppliers, hire and fire all the staff, control the finances and set strategy. An owner-centric business will not be attractive to a buyer because the risk to future profitability after the owner’s departure is too great. While there is some value and risk reduction in key employees holding some of the key relationships, this is what I call building a business no one wants to buy. With enough time, you can properly structure the business to transfer those key relationships to key employees which brings us to the last point.

5. Consider KEY employees in your exit and sale of the business. Retention of key staff is paramount for a new owner. This reduces the risk and flows on to an increase in the value of the business for obvious reasons. It’s important to communicate any exit or business sale plans with key staff as early as possible to gain their support and avoid any unexpected surprises. Ensuring that staff transferring to the new owner are looked after will assist in any transition and enhance the value of the business. Who knows, existing key staff might be prospective buyers of the business! “People buying a business are looking for traps or hidden risks. The quality of the information you provide to a prospective buyer  about your business must be truthful and fully transparent. You have to be able to provide a credible answer as to why you are selling, be prepared to be restrained from acting in competition to the purchaser among several other considerations.

If you get started now, documenting your Management By Metrics™ and Pathways To Profits™, you’ll not only substantially increase the value of your business, you’ll attract more buyers, potentially eliminating the need to deal with an expensive business broker.

I made a blog post about this about a week ago asking if you wanted to sell your business and our investors are still waiting, with cash in hand…

The requirements include:

• They must occupy the senior management position in the business;
• They must have substantial ownership interests in the business. In this respect,
• It’s preferred he / she own 100% interests in the business;
• They must employ at least one employee to work in the business;
• The business turnover is at least $200,000 per annum.

If you have or know of a business that fits this criteria, post a comment and I’ll get back to you.

Onward and upward!

Dr Marc Dussault

P.S.

If you’re looking to sell your business in 1, 2 or 3 years and want to get MAXIMUM CASH for it, you really need to consider the Business Mastery Platinum Program to increase it’s value now rather than later, but that’s a discussion for another day.

Right now, we have people who WANT TO BUY A BUSINESS!

If you’re interested to sell your business, we’ve got several investors who have contacted us who want to buy businesses…

If your business is producing $200,000+ in annual sales with at least one employee other than yourself and does not require a license or franchise to be run, we have several investors and entrepreneurs who want to invest between $100,000 and $500,000.

Please post a comment on this blog if you want to consider selling your business.

Because of the success of our programs, that GUARANTEE RESULTS, we now have people contacting us to BUY businesses that we recommend.

If you would like to sell your business in 1, 2 or 3 years from now, you definitely want to consider our Business Mastery Platinum Program. It will double, triple or quadruple your business’ value.

Not sure, think again. A Sydney News Agent has increased his business’ value by at least $100,000 just with ONE exponential strategy – if you’re intrigued click here to see how >> Long Tail Retail Niche Marketing << can put that much OR MORE in your pocket when you decide to sell...

So there you have it - Exponential Marketing in action, right before your eyes.

Imagine that - people wanting to BUY your business BEFORE you even want to sell it?!?!

Welcome to my world of Exponential Mindset™ thinking.

That’s it for today.

Onward and upward!
Dr Marc Dussault

P.S.
Make sure you are subscribed to this blog so you don’t miss important announcements like this. You just never know when I’ll post something that can make all the difference or maybe it’s just help you make more money with 1 percent improvements you need to make today.