WHAT IS YOUR BUSINESS WORTH?

AUTHOR

Bruce Coudrey

IT COULD BE WORTH MORE THAN YOU THINK!

Did you know that many business owners don’t realise that their businesses are valuable? Often business owners simply close down and walk away from their business without ‘cashing-in’ on the Goodwill that they have built up in their business. What a shame…. all those years of hard work – and no reward for their effort…. if they had only known that there was a buyer out there for their business, they may have acted differently. There is another group of business owners who operate their businesses every day, without planning for the day that they will sell out. Oh… they plan to sell, but they just don’t know when, or how, or who they will sell to…….. or how much the business should sell for. There is no plan in place – just a vague intention that one day they will sell. Do you fall into either of these groups? ..or do you have an exit plan for how you intend to maximise the reward that you deserve when you decide that it’s time to move on. Having a plan on how and when you will sell your business is known as having an “Exit Strategy”. What are the benefits of having an Exit Strategy? With an Exit Strategy in place you get to sell your business on your terms, when it suits you, and when you are ready. This makes you a CONFIDENT seller. You will be confident because you will know that your business is ready to sell, and that alone makes it very attractive to potential buyers! Without an Exit Strategy in place you will be a passive seller – waiting and hoping that a buyer will come along and solve all of your problems…. that is like gambling, and that way you are simply reliant upon chance… that’s no way to run a business. Having a proper Exit Strategy in place will allow you to cash-in quickly, easily – and scientifically. Having an Exit Strategy will enable you to:

• Get the best possible price
• Avoid disruption to daily trading
• Avoid “time wasters”
• Save money
• Achieve minimum settlement time

So how do you create an Exit Strategy? You can talk to an accountant, business coach, lawyer or a business broker. Business brokers work in the market everyday, and they know what your unique business will require to be ready to sell for maximum value. They can advise on the 17 areas that you need to consider when selling, and how to implement your plans. An Exit Strategy includes:

• A target date
• Preparation of a list of targeted potential buyers
• Knowing what potential buyers will want and ask for
• Determination of an appropriate asking price
• Preparation of financial accounts and data that buyers will require
• Creation of a marketing plan and tactical execution timetable

Many business owners never get around to actually sitting down and planning how and when they will sell out of their businesses, they procrastinate, and let other issues take priority. Don’t put off this important part of business ownership, do it soon – do it today! Business owners with an exit plan in place are often proven to be more effective business people than those who don’t. This is because they have focus and direction. They are not aimless, because that know where the business is headed, and exactly what they have to do to achieve their goals. Having direction provides confidence, and confidence enhances performance. If you would like to receive a free book entitled “Twelve Tips for Selling Your Business” contact the author. Details appear at the end of this article. 

CASE STUDY – 

In 2005 Merv and Linda were ready to retire from their business located in a rural Queensland township. Just like so many other small business owners they had never set a real goal for when they would sell the business – or for how much they would sell for. They had owned the business for over twenty years and had worked long and hard to survive in a difficult region. So without much planning, they decided to put the business on the market. Their financial advisor assisted in selling the business, and after a year, they had not sold. They hadn’t even spoken to one serious buyer. As time went by Merv and Linda started to think about simply closing down the business, but as they owned the premises too, they felt it would be better if they could sell, and find a tenant to operate the business. In August 2006 Merv & Linda engaged a professional business broker to sell their business, and in October 2006 the business was sold… for $900,000 – plus stock! The buyer was a multinational company.Just when they were looking to “walk away” from their business, they found the right person to sell it for them – and they are $900,000 better off as a result! Had they been in a position to plan their sale, and prepare over time, they would have sold their business at a premium price, and they would have sold out within a defined time period.

 Benchmark Business Sales and Valuations