Business Succession and Exit Planning - $3Trillion

opportunityCraig West

Did you know?

(The MGI Australian Family and Private Business Survey 2013)

The average age of a family business owner in 2013 was

(Up from 55 years in 2010)

58 years

Would seriously consider selling business if approached.• 25% have been approached in past 12 months • 79% if including non-family business

64%(Up from 61% in 2010)

Baby Boomers – the 18 year wave

Since 2008, almost half of business owners over age 50

have delayed their retirements due to the GFC.

of retired business owners do not have an adequately funded retirement.

(Up from 31% in 2010)

(The MGI Australian Family and Private Business Survey 2013)

(Based on a male turning 50, female would be 35.5 more years)ABS Life Tables, States, Territories and Australia, 2010-2012)

If you turn 50 today, your life expectancy

is now 32 more years.

34%

Why Business Succession and Exit Planning?

55% of all business exits are due to death, disability,

bankruptcy, receivership,liquidation or simply closing

the doors.

Of those that plan to sell…

32% Wish to retire

25% Have concerns for the future

21% Lack a family successor

10% Originally intended to sell

6% Sale price exceeds expectations (down from 20% in 2003 and 17% in 2006)

Sale of Business

(The MGI Australian Family and Private Business Survey 2013)

Only 20.4% have a clear process for successors to develop as

individuals, in their roles and in the business

Leadership Succession

37% Letting go of leadership and control

36% Securing adequate capital for growth and retirement

33% Providing liquidity for family owners to exit

33% Choosing a suitable ownership structure for the next generation

Issues and Challenges

(The MGI Australian Family and Private Business Survey 2013)

29% Communication between family members

75% of businesses do not have agreement on a proposed succession

plan even though 33% are relying on sale of the business for cash to fund retirement.

Succession

How to maximize the Value of a Business – Internal Aspects

Size Does MatterA business with a turnover of $5 million or more will

almost always sell at higher multiples.

Design your business to grow to at leastthis level by:• Making acquisitions• Opening in other states• Looking for baby boomers

“desperate” to exit and retire

Business Model

Ensure every aspect of the business is aligned with your business model – is it Boutique or Scale?

Revenue

Recurring revenue is worth more, businesses that need to make sales continually are far less valuable.

Sales and Marketing

All businesses need a sales and marketing machine that runs independently

Systems

Save yourself time effort and money

Systemised businesses are simpler to run and less risky.

Lower risk is always more valuable.

Employees

Getting employees to think and act like business owners can make a substantial difference.

Has an employee incentive plan been set up?• Profit Share (Income)• ESOP (Equity)

Keeping key employees within the business after you leave increases the value of your business.

Corporate governance and compliance

Don’t ignore Corporate governance!

Can add considerable value and again reduces risk

Deals often fall over at Due Dilligence Stage, due to poorly prepared accounts, badly documented processes and little to no governance structures.

Owner Dependence

• Business needs to be able to run independently of your involvement

• Could you take a two month holiday?

How to maximize the Value of a Business – External Aspects

Strategic Buyer

Strategic buyer- someone who will pay more for your business because they benefit more than most buyers

Strategic sales are often not about a multiple, but about the future strategic value.

Information Memorandum (IM) Document

• IM’s will attract and convince the right buyer

• Designed with the buyer in mind

• Highlighting the strategicopportunity for the buyer

Tax Planning• Every exit has several different elements of

taxation:• CGT• Stamp Duty• Etc…

Adequate tax planning can save you a large percentage of the sale price in tax.

Due Diligence and Documentation

• Many transactions fall over at this point

• Good documentation will support your value proposition not detract from it

Negotiation

• The conduct of negotiations and discussions leading to the sale are a very important aspect

• Post GFC – get the terms of the sale right!

Legal Agreements

• Legal Agreements will not scare off buyers

• Structured to protect you after the sale

Corporate AdvisersChose a corporate adviser who has a reputation for selling good quality businesses. This automatically positions your business in the “quality business” category.

Well presented businesses are taken ore seriously, seen as far more valuable

The Succession Plus Process

What Next?Further information on our website:

www.successionplus.com.au

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Arrange a free 90 minute review

Craig West

1300 665 473

cwest@successionplus.com.au

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