How to increase your personal wealth by having your business sale ready

The statistics are damning in that 90% of owners who manage to sell their businesses don’t get what they wanted or expected when they sold.

Why? And more importantly, what do those that do sell at the right price do differently?

Research has highlighted that the reason most owners don’t achieve their exit is due to the fact that their businesses were “not sale ready.” Within excess of $8million worth of businesses available on the market today, savvy buyers are able to selectively choose those with the smallest risk profile and the greatest ROI potential.

1. So what does being sale ready mean?

"Preparing your business for what a target purchaser might look for so that the value they will pay matches the value you place on the business."

Much has been written in the press about the baby boomer generation wanting to sell or transition their business over the next 5-10 years creating a perfect storm of business owners.

This is being seen in the following market context:

  • 95% of business owners that approach a business broker are doing it for emotional reasons. Only 5% are doing so as part of a formal exit strategy
  • 50% of these business owners are not Sale Ready
  • Of the 50% that are Sale Ready, 90% do not achieve the price they had assumed their business was worth
  • The difference in sale price between being Sale Ready and not being Sale ready can be 3 – 4 times the EBIT multiplier
  • There are 1.54 million businesses in Australia and 1/3 have owners that will be over the age of 55 by 2024
  • Over the next 8 years it is estimated 1.4 million business owners will seek to retire
  • The largest business bank in Australia estimates over 60% of its customers will seek to exit in the next ten years.

The resultant reality is that only a small number will unlock sufficient wealth to fund their future life journey.

It doesn’t have to be that way. Owners can significantly grow the value of their business and hence personal wealth on sale or transition of the business, simply by having their business sale ready.

2. So what does a sale ready business look?

A sale ready business will have many of the following characteristics:

  • Shareholders ready for the transition
  • Effective management structure not reliant on the owner
  • Well-developed systems & procedures
  • Effective management information system
  • Three years of profitable growth history
  • A strategic plan
  • Clearly identified target purchaser
  • May have an ‘X’ factor, e.g. a strategic competitive advantage or strategic investment benefit.

A business doesn’t need all of these characteristics to be sale ready, however it does need a number of them. The more you have, the higher the value.

3. How many characteristics does your business have?

Simply Business has a Sale Ready System to help owners achieve the ultimate reward for being in business, which means to sell the business at significant enterprise profit. This in turn has a significant implication on the personal wealth and hence the funding for the next stage of your life journey.

If you would like to know more about how to grow your personal wealth by having your business sale ready please contact Philip directly.

Simply Business Australia

Philip Coombs “The Profit Coach”

0419 834 678