The statistics are damning in that 90% of owners who sell their businesses don’t get what they wanted or expected then they sold. Why? And more importantly, what do the 10% do that the 90% don’t?
Research has highlighted that the reason 90% of owners don’t achieve their exit goals put simply, because their businesses were “not sale ready”.
So what does being sale ready mean?
“Preparing your business for what a target purchaser might look for so that the value he 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. The reality is only a small number will unlock sufficient wealth to fund their future life journey.
The problem has been created to the following market context:
- 95% of business owners/organizations that approach a business broker are doing it for emotional reasons. Only 5% are doing as part of a formal exit strategy
- 50% of these business owners/organizations 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 x or in the millions of dollars
- 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 9 years until 2024 it is estimated 1.4 million business owners will seek to retire
- The largest business bank in Australia estimates 2/3rds of its customers will seek to exit in the next ten years.
This reality check results in the sale of businesses at a price where the owners are angry and/or disgruntled because they left significant amounts of money on the table. This affects future lifestyle and personal wealth.
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.
So what does a sale ready business look like i.e. what do prospective purchasers look for?
Contrary to popular beliefs the majority of purchasers are looking for a business which is sale ready as they are lower risk and will pay in accordance with how sale ready they are.
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
- Strategic plan
- Clearly identified target purchaser
- May have an X factor
A business doesn’t need all of them to be sale ready, however does need a number of them. The more ticks, the higher the value. How many ticks did you 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 Phil directly on:
Mobile: 0419 834 678
or if you would like a copy of our white paper “How to Grow your Personal Wealth by Having Your Business Sale Ready”, please contact Donna Blackwood on 03 9797 0590 or firstname.lastname@example.org