'What's it all Worth? - Part 1' Article by Tina Zawila

Approximately 80% of Australian businesses are privately-owned, and over the next 10 years the baby boomers will be looking to retire. In fact 40% of business owners are planning to leave their business in the next five years. 

So it should come as no surprise, that in the last few months we have had a number of enquiries from clients asking “What’s my business worth?”, “How do I market it for sale?” and “How much tax will I pay?”

The “what’s it worth” question is vital because 50% of business owners expect the proceeds from the sale of their business to be the primary funding source for their retirement. 

There are a number of ways for owners to “exit” their business including; succession (to children, family members or current management/employees), merging with another business, capital raising or initial public offering (IPO) via the stock market, sale of the business as a going concern, or simply close and liquidate. 

60% of business owners would prefer to sell the business as a going concern.

So how do you maximise the valuation of your business and ultimately the sale price?

The secret is in the preparation.... Ideally, preparations must be made well in advance, maybe years, so that the business is ready for sale and remains in a constant state of readiness for when the opportunity arises.

It’s a Beauty Parade... A number of things must be attractive to a potential purchaser.  Including:

· Relationships with customers and suppliers are with the business, not the existing owner

· The business has sound operating systems, good financial accounting and a clear strategy for the future

· Intellectual Property and Trademarks are protected and up to date

So it’s all about putting your business in the best possible position for sale.

If you identify who the potential buyers of your business are likely to be, and anticipate what they will be looking for, you will position yourself to maximise this final return on your investment in your business.

Are you looking to sell your business?

Are you prepared for the sale?

What is your strategy?

Are you planning on using a business broker to assist you with the sale?

In next week’s article, I will discuss exactly what buyers are looking for and some common traps and pitfalls to avoid.  In the meantime, if you need specific advice on the value of your business or on how to prepare for sale, please call us at Sothertons on 4972 1300 – we are here to help you in [Business] and in [Life].