Your business has supported your family, supported your dreams, supported your employees and has made a difference to many lives.
Let’s face it – you’re still in business so you’ve obviously done a lot and your business has proven its worth over many years.
Whether you are looking to retire to spend more time with your family and living your dreams, whether you are looking to retire because you’ve always had a goal retirement age or whether it is simply time to hand the reigns to the next generation, the fact is – you’ve decided to retire.
How carefully have you really considered your business in that decision?
Before I begin, I’d like to highlight the scale of business in Australia;
The statistics tell us that a huge majority of businesses in Australia and SMEs and a large majority are family owned.
The latest Voice of Australia Business Survey shows just 19% of Australian SMEs have a succession or retirement plan in place.
To put these stats simply – we have a large majority of Australian businesses where the owner/MD/CEO is considering retirement where there is simply no succession plan in place.
Considering the baby boomer demographic (those born between 1946 and 1964) will all be of retirement age within the next 14 years, the low rate of succession and /or sale planning is very alarming.
To assist in improving these statistics and simplifying the process, let’s firstly look at the 6 most common exit strategy options available to business.
This is where all of the assets of the company including plant and equipment, cars, real estate and product or stock are sold before the business is closed.
Sometimes and for unforeseen changes in circumstances or the market, liquidation might be the only option but given time, we regard it as the least preferred option.
Basically, this strategy is similar to a liquidation over time. It involves taking profits in the form of salaries or dividends instead of reinvesting them back into the business for growth or diversification.
This strategy is very successful when planned in conjunction with an accountant or financial advisor and forecasts are meticulously planned. When planned well, you avoid the sudden realisation that cash required for the business is no longer available or that your cash cow has become hungrier for time and attention in order for the cash, profits and your lifestyle to be maintained.
This involves selling your business to (usually) a colleague, supplier, family member, customer or key employee.
When deciding on a friendly sale, our most poignant advice would be to employ a professional third party such as a business broker. This way, you can avoid much of the emotional element of the sale and personal/professional boundaries are easier to maintain and respect.
To put your business on the market is a viable and often considered exit strategy. Whereas the above option would be to sell to someone you know, in the case of a market sale, the purchaser could come from anywhere.
Whilst one of the most common exit strategies, we find that many business owners vastly underestimate the time and consideration required to sell your business yourself. Again, we would always recommend seeking the assistance of or commissioning a selling agent experienced in business sales so that you can continue in the day to day running and success of your business.
Within many industries, it makes sense for businesses with similar target markets and similar values or business models to sell to each other or create a merger. One of the easiest ways to achieve economies of scale is simply to purchase another like-business.
Mergers and Acquisitions can happen in any industry, with any size of business. They are, however, more common with larger companies and require the experienced advice of business brokers, financial managers, and lawyers.
Referred to as taking a company public, the IPO (Initial Public Offering) involves a private company offering its shares to the public for purchase for the first time. Once complete, those shares become listed on a stock exchange and trade in the open market.
In the modern tech market, we hear of the huge success of IPOs such as Atlassian and AfterPay, however, the dark side of unsuccessful IPOs is not often reported in main stream media.
Of course, there are many other exit strategies that involve a combination of the above. In the end, the best exit strategy is the one that is planned, considered and right for you, your family, your employees, your shareholders, your goals and your lifestyle.
If you are starting to think about exiting your business, contact us today to discuss your exit options.
At Exit Advisory Group we help entrepreneurs develop growth and exit strategies to maximise their wealth and provide options.
We do this by giving business owners the tools and strategies to design more profitable, efficient and enjoyable businesses to own - that are also less dependent on them. When they choose to exit, they are in the best position to unlock the wealth in their business and be rewarded for their hard work.
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