What is your business worth? Will it be enough to fund your retirement?
What is your business worth? Will it be enough to fund your retirement?
You might dream of spending your retirement on luxury cruises or perfecting your golf swing, but without a plan to exit your business, your “dream” may be just that.
Knowing what you want to do with your business in the future can seem challenging, but it’s a challenge you shouldn’t put off if you want to see your dreams come to fruition.
Too many business owners fail to develop a plan for exiting or leaving their business, and they often end up with a lifestyle that doesn’t match their goals.
Getting your business ready for the future - whether that involves selling up and paying for your retirement or confidently handing it over to the next generation - means knowing what your business is worth today and creating an exit or succession plan.
What is your business worth?
When the time comes to sell, many business owners start with a valuation on their business. Often, they have planned how they are going to live in retirement on the sale proceeds. However, there is usually a gap between what the business is worth and what they need to live in retirement.
Unsurprisingly, this can be a real shock.
Planning an exit or succession too late results in a lower business valuation and sale price (if you are planning on selling).
As a business owner, you are likely to start thinking about exiting your business when one of the following events occur:
- You are getting closer to 65 years and thinking about your retirement years
- You may have a son or daughter who you want to take over the business
- You may have experienced a death with a business partner, a disability or a divorce.
The sad reality is that most business owners wait too long to start preparing for a business exit or business succession. The result? Many businesses are simply not ‘exit ready’.
This causes problems such as missing sales opportunities, failing to generate sufficient moneys from the sales process to support your retirement plan or simply not being able to sell at all.
Handing over the reins to family
Many business owners dream of seeing the business they started, thrive in the hands of the next generation. However, many fail to properly plan for a family handover. Without a succession plan:
- You may not have put the systems and processes in place to enable your son or daughter to succeed
- Your son/daughter may end up having to close down your business and the heritage of what you’ve built may be lost
- There may be squabbles between siblings which can impact family relationships and tear families apart, which is not the legacy you want to leave behind.
It’s important to have a business succession plan in place to ensure a smooth transition between you and the future owners of your business.
If you are planning on exiting via sale, what does a prospective buyer look for?
Often, business owners focus on how they can build their income because they believe that’s what’s driving an acquisition price for their business.
But income is only one of a large list of criteria that a potential buyer is looking for. Some of the items on their shopping list are:
- Stable profits over 3 years or more
- Growing income and good growth potential
- Strong financial management with a healthy P&L and Balance Sheet
- Robust systems to enable the business to be scalable
- What are the risks and how are they managed?
- Long term, high performing employees
- Strong leadership of the team
“Potential buyers aren’t emotionally invested in your business like you are. They want to pay as little as possible for a business they can see has potential so they can build/maximise the value of their investment. If your business isn’t strong in any of the above areas, they are going to use this to knock the sale price down. If your business is in good shape and ticks all the boxes, then you’ll have a better chance of achieving a higher sale price.” Coral Wilson, Wilson Teis.
How can you maximise the value of your business?
Shift your focus from building income to building more value into your business. Ask yourself, what do I need to change, improve or strengthen to make it more attractive to a buyer? If you plan to hand over your business to your son or daughter, what do you need to change to set your offspring up to succeed?
While it’s important to have a good exit or succession action plan, it’s even more important to be able to integrate exit or success planning actions into everyday business activities.
Introducing 90 day actions that support your overall exit or succession plan will help you to get your business exit or succession ready faster.
How long does it take for a company to become ready to sell or exit?
You’ll need to consider a few questions from your own perspective. What sort of retirement lifestyle do I want to enjoy? How much money will I need to finance this retirement? How will the business give me what I need financially to retire?
This is why you need not only a good exit or succession planner like Coral and Mike Wilson.
What are the first steps to getting started?
Getting your business ready for an exit by sale or succession starts by getting answers to the following three questions:
- What is my business worth?
- What do I want for both myself (in retirement) and my business?
- How do I get there?
Coral and Mike can provide you with a comprehensive assessment of your business through the WT Value Discovery Report, which includes:
- A current business valuation
- A detailed plan to create more business value
- A clear understanding of your personal financial goals.
You can’t draw a roadmap if you don’t know the destination; the WT Value Discovery Report will help you identify that destination.
Are you exit or succession ready?
Exit planning provides you with a better future. It allows you to exit on your terms. Give Coral or Mike a call today on 07 3255 1455 to start getting your business ready for the future.
If you’re not quite ready to kick off with a Discovery Report, why not take our complimentary health check-up? Coral and Mike will give you a call to discuss the results.
Take our complimentary health check up here.
https://www.surveymonkey.com/r/exitready
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Coral, Mike and the Team
- The Wilson Teis Group deliver a large range of services including accounting and business services through Wilson Teis, exit planning and business improvement services through WT Value, bookkeeping through WT Bookkeeping; and operations management services are brought to you through WT Operations.
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