Realising the value of your business

Time to sell“Begin with the end in mind” Habit 2 – Stephen R. Covey.

Often having a business is a lot like having a “superannuation plan”, at some point you’ll want to cash it up. It is easy to think “she’ll be right”, there’ll be a buyer when the time comes to sell. However, the evidence is forecasting a different picture for our aging population.

As the ANZ  reports, “recent surveys show that the average age of business owners in New Zealand is mid 50’s and many of them are approaching retirement. At the same time there is a decreasing number of potential buyers in the market”.

Meaning, the baby boomers will need to sell their businesses to people aged 24 to 34 years. This age group has a significantly lower population base i.e. less potential buyers, refer to the graph.

Not only will there be less potential buyers, but the 24 to 34 year old age group have less capital resources to fund such purchases. This is due to such things as being saddled with student loans, delaying their first home purchase (due to paying off student loans and the cost of entry level housing). In other words, they do not have the capital base to leverage off to buy a business.

How can you make it easier to sell your business, and reduce the associated risks of a decreasing number of potential buyers?

Well, there are some key tick boxes a potential buyer may look for when going through the due diligence process. One for example, is compliance with employment legislation (employment agreements, health & safety, policies & procedures), another is succession planning for the business owner and any other key people.

Banks and other lending institutions assessing whether to lend to buyers, are interested in succession planning as a means of reducing risk.

At Aureum we are experienced in the human resource side of the due diligence process, such as employment legislation compliance and succession planning. We can help you “begin with the end in mind”, and groom the people side of your business for potential buyers.