Does your retirement plan hinge on listing your business for sale?
With no superannuation requirement for the self-employed, many women will be relying on the proceeds from selling their business in order to support themselves later in life.
One in four business start-ups is founded by women, and most female business owners are aged between 44 and 55.
However despite this, many business owners do not have an exit plan in place to ensure they maximise their business’s sale value and hence their finances for retirement.
Even those who have no intention to sell or retire from their business in the short term should consider getting “exit ready”.
And those who hope to sell the business within the next 10 years should definitely be taking action.
It takes time to implement the measures that will maximise the value of the business when it is time to sell.
There are a number of factors that contribute to exit readiness.
The owners who are best equipped to sell their business and maximise their return on investment have businesses that are profitable, transferable, sustainable and visible.
To maximise value, the business owner’s focus needs to be on business performance and profitability.
Maintain your attention on the core business operations and the success of your business through a strong strategic plan.
Engaging a professional transaction advisor to plan and manage the sale process will enable your focus to remain on the business.
Consider the existing legal agreements in the business – leases, customer contracts and so on.
Do these agreements have a clause that allows them to be transferred to another entity?
Only a business that is fully transferable is truly exit ready and able to maximise sale price when the owner decides to sell.
Non-transferable legal agreements are not ‘sale friendly’, so act early to ensure any existing legal agreements won’t create problems once discussions start with potential purchasers.
When you list your business for sale, the sustainability following your exit is a major consideration for potential buyers.
A business that relies heavily on the owner to operate is far less sought-after than a business with experienced management in place.
Ensuring the right staff members and management is in place will aid the success and long term sustainability of the business.
- Have you considered your key staff members’ commitment?
- How will you keep them loyal to the business after you leave?
- Have you included effective post employment restraint clauses in your employment agreements to protect the business’ interests should employees leave?
Inadequate reporting systems and incomplete financial information can frustrate the due diligence process and harm negotiations with a potential purchaser.
Poor financial information does not instil confidence in a potential purchaser.
Quality monthly management reports and forecasts supported by detailed assumptions provide visibility over performance and the overall operations to potential purchasers.
Ensure that you regularly prepare budgets and forecasts supported with documented assumptions.