Double the value of your business & sell
 

Double the value of your business & sell

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Detailed presentation showing our proprietary process to manage a business succession and exit

Detailed presentation showing our proprietary process to manage a business succession and exit

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Double the value of your business & sell Double the value of your business & sell Presentation Transcript

  • Double the value of your business and sell within 3 years Craig West
  • Did you know?
  • …. is about taking a strategic approach to your exit strategy; without it, the value in your business will retire when you do
  • 51% of business owners plan to use their business as their primary source of funding retirement
  • 43% aim for a lump sum and a third expect an ongoing income stream
  • 56 years the average age of a family business owner is
  • 55% of all firms plan to recruit in the next 12 months (competition for talent will increase)
  • 61% would seriously consider selling if approached
  • 31% do not have an adequately funded retirement fund
  • Why Business Succession and Exit Planning? 55% of all business exits are due to death, disability, bankruptcy, receivership, liquidation or simply closing the doors.
  • Baby Boomers – the 18 year wave
  • All Businesses 3,015,318 Employing 837,078 Agriculture, Fishing & Forestry 74,111 Non- Agriculture Private Sector 762,837 Large 4,646 Medium 71,791 Small 686,400 Public Sector 130 Non-Employing 2,178,240 7% of these exit every year – 53,400 Number of businesses in Australia Exiting
  • Stage 1: Identify Stage 2: Protect Stage 3: Maximise Stage 4: Extract Stage 5: Manage
  • stage one : identify
  • Financial Analysis
  • Non-Financial Analysis
  • Benchmarking
  • Due Diligence Checklist of all vital information: • Financials, tax returns, BAS. • Legal – licenses, leases , employment agreements. • Policy & Procedures / Systems. • Intellectual Property – patents, trademarks.
  • “ Strategic Planning is a process by which we can envision the future and develop the necessary procedures and operations to influence and achieve that future.”
  • Stage Two: Protect
  • Structure Review ASSETS RISK
  • Decrease Risk Non- financial analysis Owner dependence Reverse due diligence Advisory board Key people
  • What do you want from your business in 5-10 years?
  • Stage Three: Maximise Value
  • 1.Exit options 2.Job vs. Business 3.Boutique or Scale 4.Expansion or Efficiency 5.Decrease risk 6.Improve earnings – 5 * 5 * 5 7.Strategic exit 8.Listed company as buyer 9.Offshore buyers
  • Strategy
  • Maximise Value Job vs. Business Can you leave your business for days, Weeks, months? How can you add value to your business?
  • Adding Value
  • Efficiency or Expansion
  • EARNINGS EBITDA Financial Analysis Gross Profit + 5% Reduce Expenses – 5% Increase Sales + 5%
  • The 5 x 5 x 5 Process Increasing Business Profit & Value How does it work? 5% improvement in three key areas of your business
  • Here’s an example:
  • "Price is what you pay Value is what you get " Warren Buffett 1 + 1 = 3 Strategic Sale
  • The acquisitive private equity fund bought MYOB in February 2009 for about $500 million, and then boosted earnings by stripping out costs, raising prices and aggressively growing its customer base. The deal is understood to have been valued at a multiple of 11.3 times EBITDA. MYOB is used by more than 1 million SME’s in Australia and NZ. AUGUST 2011 – Archer accepts $1.2B for MYOB
  • Private to public arbitrage Public company valuation = PE/EBIT ratio. RETAIL 11.2 MEDIA 10.6 Source: ASX FINANCE 6.0 MINING 8.5 PROPERTY 6.5 INTERNET 16.9 Historical ASX average 9.6 x Private companies average 2.5 x The value gap is called “private to public arbitrage”
  • AUSTRALI AN BUSINESS PTY LTD $500K Profit EXIT TRADE SALE @ 2 x = $1 million STRATEGIC SALE @ 4 x = $2 million SALE TO LISTED CO @ 7 x = $3.5 million To achieve a higher sale price, it’s much smarter to focus on HOW to sell and WHO to sell to, rather than trying to increase profit.
  • The total value of transactions that closed in CY2010 increased 35% over the previous year to US$736 billion. Europe and the Asia-Pacific region were the largest contributors to growth. 8.8 * EBIT average
  • Offshore buyers The total value of transactions that closed in CY2010 increased 35% over the previous year to US$736 billion. Europe and the Asia-Pacific region were the largest contributors to growth. 8.8 * EBIT average
  • Net proceeds is the important $ CGT – small business concessions. Structures – who owns assets – before and after Other costs - legal, accounting, other fees.
  • Tax Issues Complicated transactional issues upon exit! Solution = proactive and holistic advice Structures and estate planning TIME - PLANNING
  • Stage Four: Extract Value
  • 100% owned 20% owned Equity Matrix
  • Did you know that over 72% of Gen Y want to own their own business …. but not on their own!
  • Secure Funding  Many plans fall over at this point  Age & Financial situation?  Internal succession funding  Equity Partner / Investor
  • Peak Performance Trust to fund  Profit share based on performance  Employees thinking and acting like business owners  Profit share used to fund purchase of business by those same key employees  Employee retention  Improved performance and increased value
  • Stage Five: Manage Value
  • Successors Exit Options
  • Smoothtransition Incoming CEO or Partners Gradually increasing involvement
  • Smoothtransition Existing CEO or Partners Gradually reducing involvement
  • Strategy for successful succession: systems / processes
  • Communication Strategy • Implementation Success • Shareholder / Key Management Communication • Buyer Communication • Staff Communication • Client Communication
  • Business Coach Systems / P&P Bank Manager / Broker / Finance Sales / Marketing IT and/or Web Accountant Legal Other Professionals & Advisors
  • Strategic financial projections
  • Case Studies
  • Client case study Real Estate Real estate office in NSW Combined commercial office and residential sales : Central Coast 3 owners Not in a rush to exit Business Value approx. $2.4 m 14 employees
  • Client Case Study: Real Estate  Real estate office in NSW  Combined commercial office and residential sales : Central Coast  3 owners  Not in a rush to exit  Business Value approx. $2.4 m  14 employees
  • Client Case Study: Stage 1 & 2  Valuation, Due Diligence and benchmarking  Highlighted key value drivers and growth strategy  Identified 5 key staff ( 3 sales, admin/acct, property management)  Reviewed exit options and strategy  Management buy out  Used benchmarking to focus growth strategy & improve performance
  • Client Case Study: Stage 3 & 4  Implemented Peak Performance Trust  Engaged and motivated 5 key staff with equity plan  Reduced risk – staff retention  Restructured  Asset protection & risk management  Tax and CGT advice  Wealth outside business structure  SMSF to hold appreciating assets  Risk minimisation  Insured for unplanned events
  • A Recent Typical Project  5 month time frame  3 existing partners, one potential, two possible  5 year plan to sell down  Accelerate sale by partial sale to VC / Private Equity  18 months of ongoing coaching/consulting
  • Outcomes  Pre-documented sales programmed over 8 years  Maximum Equity Value for outgoing shareholders  Motivated Staff – with a predetermined program to transition through income, equity and control  Recruitment / retention tool  Accelerated thru initial sale to Austbrokers
  • Client Case Study: Clearwater Filter Systems Sale of a family owned private company at 9.5 times earnings to JWI. Key Factors: • Listed company as buyer. • Offshore buyer . • Strategic sale – expansion from NZ to Australia. • 5 year exit strategy.
  • Client Case Study: Sydney Software Business • 60 year old owners - focused on reducing involvement and gradual sale. • Peak Performance Trust involving 8 key staff. • GM now running business – “semi retired” owners. • Business Value now over $6 Mil. • All other assets separated and protected. • “truly a good story of transitional management”
  • What Next? Further information on our website: www.successionplus.com.au Complete feedback form to be added to our newsletter Arrange a free 90 minute review
  • Craig West 1300 665 473 cwest@successionplus.com.au Visit www.successionplus.com.au Follow us on: