So You Want to Retire From Your Business Profitably?

So You Want to Retire From Your Business Profitably?

If you’re a business owner in your 50s or 60s (or even in your 70s) ask yourself:

  • When am I planning to slow down? To retire and do the things I’ve promised myself and my family for so long?
  • When will I convert my years, or decades, of hard work in my business into a nest egg to fund my retirement in comfort and luxury?
  • What steps have I taken, or do I need to take to maximise the value of my business?

The sad fact is this most business owners have not been contributing enough into their superannuation funds or investments, are tired and jaded, and worried about their business and financial future, and are looking to their business to fund their retirement. But according to a recent study, 41% of business owners do not have an adequately funded retirement fund.

According to the Australian Institute of Business Brokers (AIBB) there’s a record number of businesses for sale across Australia. Specifically, there’s an oversupply of baby boomer business owners wanting and desperate to sell their businesses. And there’s nowhere near enough buyers, let alone ones prepared to pay the sum wanted.

Nabil Salameh, Director of Quantum Business Advisors, points out that most businesses are not in a shape to be sold. According to the AIBB, there are “a lot of businesses trying to sell which are poorly priced or just not viable or saleable”.

It doesn’t have to be this way. Owners can significantly increase the value of their business and therefore their personal wealth on sale or transfer of their business, simply by taking steps to make their business more attractive.

There are ten steps that can be used to maximise the value of a business. These steps can be grouped into three distinct phases: 

Phase 1:  Optimum Performance
Phase 2:  Polishing the Business
Phase 3:  Creation of the Sale

Phase 1:  Optimum Performance

In this phase, the goal is to improve the profitability of the business by removing waste, and by growing sales. One of the most efficient industries globally is the automotive component manufacturing industry and the lessons on how they remove waste can be applied to any other industry. Most importantly, this can have a direct and positive impact on the profit of the business.

Also in this phase is driving the growth in the business. A positive trend line of the sales growth can provide confidence that the sales process in the business is working well.

Phase 2 – Polishing the Business

In this phase the aim is to make sure that all the elements of a great business are in place. This is where we make sure that, wherever possible, the future revenue of the business is locked in, preferably with long-term contracts. We establish a management infrastructure that removes reliance on the owner. We strengthen and protect the brand of the business. And we reduce the debt levels of the business in order to clean up the balance sheet.

At the end of these two phases, the business looks as good as it can and it is now that the sales process can formally begin. The business will be more profitable and be running more efficiently. At this point a choice of whether to transfer or sell the business can be made.  If the decision is to sell, then Phase 3 is undertaken.

Phase 3 – Creation of the Sale

A key success factor in maximising the sales price is to find a buyer who “needs” to buy the business. Identify several potential buyers (through brokers or other industry contacts), and analyse why the business is essential for each potential buyer.

Make sure that the negotiation process goes well with the assistance of the right advisors. Often the business owner needs to be coached on their role in the sale. There’s no point in having built a valuable business and then handling the negotiation of the sale badly.  This includes anticipating all the likely objections that will be raised by the buyer and their value-reducing tactics. 

If the steps are rigorously followed over a period of 2-4 years the probability of getting a high price for the business is maximised. It’s vital not to leave the opportunity to make these critical change too late.

For further information or to discuss how we can assist your business maximise its value, contact:

Nabil Salameh

Quantum Business Advisors

ph. 1300 7 QUANTUM



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