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Posted: 12 Sep 2007
With the big wave of baby boomers making decisions about succession plans there is likely to be a significant increase in the number of businesses on the market.
Currently the average age of a business owner in Australasia is 54 approximately. It is likely that with this group looking to sell in the next future supply may exceed demand.
To maximise the price of a business, owners need to understand the process and plan for their succession, at look at who may buy their businesses. These include a family member, an employee buy out or a sale to a third party. The last two are the most likely scenario.
If a sale is contemplated then it is critical that the accountant, lawyer and broker act as team to achieve the owner’s aims and objectives within the agreed timetable.
The preparation for the sale can impact positively on the value. A potential buyer will look at all aspect of the business not just the rent roll or sales goodwill in determining whether they make an offer to purchase. Purchaser’s will consider whether the business is keeping accurate profit centre accounts, are these figures benchmarked to industry KPI’s, is the contacts on a database up to date and is there a routine program to communicate with them.
It is also wise to understand the motivation of buyers, the reasons why you purchased the business and the way you manage it may not appeal to potential buyers.
What needs to be done before the business can be sold is a complete audit of systems and procedures to ensure that the business is maximising it’s financial potential.
Of course, having a one or two year timetable with planning and preparation is ideal, however, circumstances can change- owners may take ill, partnership and divorce can alter plans, an offer form a competitor or owner “burn out”. For these reasons owners should have their businesses in a saleable condition at all times, whilst still focusing on running the business and improving profitability.
An experienced broker and consultant can help with your succession plans. They can act as an intermediary in negotiating an internal buy out or third party transaction, achieve the best possible result.
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