BABY boomer business owners are ill-prepared to sell their company, despite many viewing it as their main source of retirement income.
According to the study, 70 per cent plan to sell their business over the next 10 years, but less than half have undertaken any strategic planning such as valuing their business or planning for capital gains tax liabilities.
Conducted by accounting and advisory business William Buck, the research indicates 50 per cent of the business owners surveyed have never bought or sold a business nor been approached by a potential buyer. More than half of those surveyed have never had their business professionally valued and most do not know how to maximise the value of their business for sale.
The research surveyed 200 owner-managed businesses in Australia and New Zealand with an annual turnover of up to $100 million, with most respondents belonging to the baby boomer generation.
Manda Trautwein, director of William Buck, advises business owners to start planning for the sale of their business a number of years before the intended transaction.
She says potential buyers will want to see the business' accounts going back three to five years and will need to understand how one-off non-recurring income and expenditure have impacted the underlying profitability of the operation.
"And buyers will want to know if the business owner is not drawing a salary because they will look at the business from the perspective of having an independent CEO running it," she says.
This is something business owners often need to plan for as many reinvest profits into the future growth of the business and therefore cannot necessarily demonstrate a track record of high profits or don't draw down a market salary.
One business owner who is thinking about the right exit strategy for her business, a recruitment company that specialises in placing scientific and technical staff, is Anne Sabine, chief executive of Evolve Scientific Recruitment.
The business is in a growth phase, but Sabine, who is in her early 50s, has not yet decided whether she wants to hold onto the business or if she is readying it for sale. "We're looking for acquisitions but I'm also forming an advisory board of external people to help me focus on the strategic side of the business, which tends to go by the wayside when you're concentrating on making sure you're cash-flow positive," she explains. "I'm looking to build it into a big enterprise because the science market is limited so I'm exploring a move into blue-collar areas to expand the business."
She is also looking to hire a chief executive. "This would give me the option to stay in the business and have a say without taking on the entire burden of running it day to day."