10 Secrets to Better Exit Value

10 Secret s t o Bet t er Exit Val ue If you re like most business owners one day you want to retire reap the rewards of your years of hard work and leave a healthy legacy for others to carry on with into the future If your business is also your retirement fund you may need to start thinking about selling quite a while before your actual sale day In some cases it may be a number of years beforehand The time to start planning is now Selling a business isn t like selling a car A car is a pretty simple proposition it s a piece of equipment that either works or it doesn t and is in good or bad shape A business is lot more complicated than a car with multiple factors impacting the business s value Customers suppliers staff management are some of the factors that may need adjustment to maximise your business s value and your retirement fund When you re running a business from day to day it s not easy to think about it from a potential sales value perspective So you need to start early in developing a plan to renovate your business to make it attractive to a potential purchaser and maximise your retirement fund You need to create a situation where the business can function without you being there or possibly you being there part time These changes generally take time to implement and then more time to see the results In our latest guide we ve outlined the factors to consider in helping you to maximise the Exit value Enjoy 1 1 www CFOonCall com au
10 Secret s t o Bet t er Exit Val ue If you re like most business owners, one day you want to retire, reap the rewards of ...
1 The Indust ry Is your business in a well established growing and stable industry Can it be negatively impacted by industry restructuring or negative global trends Will future industry trends positively affect the business Obviously people want to buy a business of today and tomorrow not yesterday You need to be realistic about the value taking into consideration current trends 2 Business Perf ormance How many years of profitable trading does your business have Some businesses have been run in the past with tax minimisation in mind now it s time to change that to a profit maximisation mindset Have you experienced sales and gross margin increase or decrease in the current year Has your wages bill increased as a percentage of sales Is there an improvement in liquidity debtors collection stock turnover etc and is the business able to control its operating costs If the business is struggling with profit and cash flow it won t look attractive to a potential purchaser and they will want a discount for poor results 1 2 www CFOonCall com au
1. The Indust ry Is your business in a well established, growing and stable industry  Can it be negatively impacted by ind...
3 Business Growt h Do opportunities for business growth exist e g can the current market be worked harder can new products services be introduced or new geographical areas opened up If so can they be practically pursued Has there been a history in the business of continual research and development and is plant and equipment in good order Are the current premises able to support growth Is there a formal business plan in place including SWOT Growth Budgets Cost Centre Analysis Strategic Plan Marketing Plan etc A potential purchaser will want to leverage off what s currently in place and the less there is the bigger discount they will want 1 3 www CFOonCall com au
3. Business Growt h Do opportunities for business growth exist e.g. can the current market be worked harder, can new produ...
4 Business Risk Is the cost of your supplies subject to inflationary pressures and or exchange rate fuel prices and are customers in depressed geographical regions Does government legislation protect the supplies you make and are they threatened by imports Is there adequate insurance in place e g Work Cover Professional Indemnity General Insurance etc Are your products services threatened by new technology IT or the web If so have you done anything about it and adjusted your business model Have you had any legal claims in the recent past Is your premises location important and if so is tenure secured Has your input supply been disrupted and affected your business recently and what is your plan B to deal with it Are you exposed to a small number of suppliers and how reliant is your business on its major suppliers Do they dictate what products services you offer The riskier the business the less attractive and hence valuable to a purchaser 1 4 www CFOonCall com au
4. Business Risk Is the cost of your supplies subject to inflationary pressures and  or exchange rate  fuel prices and are...
5 Compet it ion Have a think about your competitors are they aggressive and is there increased competition from national and overseas competitors Can the market sustain the current level of competition and is there a high cost to start up or are special skills knowledge required Could new competitors have access to greater resources than you If there aren t too many barriers to entry for new competitors a purchaser may well decide to set up in competition rather than buying your business 6 Management Inf ormat ion Syst ems Do you operate computerised accounting and a management reporting system Do you report on sales cost of goods sold employee and profit by major products services categories Do you have regular monthly reporting in place and do you follow best practice operating systems A purchaser will want to be very clear about accuracy of the results of the business 1 5 www CFOonCall com au
5. Compet it ion Have a think about your competitors - are they aggressive and is there increased competition from nationa...
7 Owners How much reliance is there on the current ownership of the business Will the knowledge be easy to transfer Will departure of the current owner cause loss of key customers and staff Developing a management team around you is a start however ensuring this is sustainable takes time to implement So start early Minimising reliance on the owner manager is important to maximising value of the business 8 Cust omers and Market Demand Do you know what is the percentage of total income of your top ten customers and the degree of their loyalty What is the percentage of customers that generate 80 of your profits Is there a strong demand for your products services and do substitutes exist What would be the impact on income if key customers sold their business How would a 10 increase in prices affect demand for your products services Customers and staff are a great asset of any business so anything you can do to secure them is important Purchasers want to be confident about the future viability of the business they are entering into 1 6 www CFOonCall com au
7. Owners How much reliance is there on the current ownership of the business  Will the knowledge be easy to transfer  Wil...
9 St af f Is the industry losing staff to other industries Think mining When the boom is on tradespeople flock to where the money is and builders find it very hard to get good staff Formal staff appraisals will confirm if there is commitment to the organisation goals and visions What is the experience and industry knowledge of your key staff and do you have strategies for staff recruitment retention and motivation What is your staff retention history and is there good communication with staff Staff are an important asset of any business so anything you can do to secure them will potentially increase business value 1 7 www CFOonCall com au
9. St af f Is the industry losing staff to other industries  Think mining  When the boom is on tradespeople flock to where...
10 Succession and Est at e Pl anning Do you have risk insurance in place Life TPD Key Person etc for owners and relationship partners Is there a documented business life plan succession plan and estate plan Is there capital for future growth and succession and strategies in place to protect grow and realise optimal business value In essence is the business easy to sell You can see from the above it s a bit like selling a house the worst state it s in the more discount a purchaser will seek If you can do the renovation prior to sale the better price you will get You are in a great position to perform the renovation because you know the business and the industry probably better than anyone There is a potential premium to be made by putting in the extra effort a few years prior to sale rather than saying I want out of here in 12 months and paying the price for a quick sale The time to start your planning is now We realize that Business Owners are generally focused on creating building and managing their business and don t always have time to plan to exit the business Don t despair you don t have to do all the work yourself We have experienced advisors across Australia to help guide you through the process Don t hesit at e get st art ed now cont act us t oday f or a no obl igat ion chat Cont act us on 1300 36 24 36 Aust 0800 180 400 NZ or visit our websit e www cf ooncal l com au www CFOonCall com au
10. Succession and Est at e Pl anning Do you have risk insurance in place  Life, TPD, Key Person etc.  for owners and rela...