Most Are badly underprepared if and when approached they don’t have the right information ready or available they haven’t considered their tax position etc.
The first baby boomer turns 65 in 2011 and the birth rate continues to increase until 2028.
The baby-boom waves made much worse by the fact that the three years preceding the boom were the GFC and many people delayed retirement or selling their business or other assets
Improved medical science and healthier lifestyles et cetera have increased our life expectancy – this dramatically increases the amount we need to successfully fund retirement.
More than half of business exits in Australia are a failure of some sort
Steve covey’s second habit was begin with the end in mind – that means we should map every single business decision to our exit strategy and ensure that we are always moving closer to (rather than further away from) our exit strategy
Succession and exit planning for the average business owner can be a very complicated issue and without the right advice and a coordinated strategic approach the ability to extract maximum value from your business (for many the largest asset) may be compromised.
Succession plus is Australia’s leading business succession and exit planning advisory firm and we have designed a unique 21 step process to ensure business owners design the most viable strategy to extract maximum value from their business when they retire.
Use This graphical analysis to identify areas where improvements can be implemented and to ensure our financials remain on track going forward
All this analysis identifies areas of substantial risk within the business areas where the value of the business could be threatened or where our multiple will be lower because of the high risk inherent within the business.
Allows business owners to easily identify areas of over or underperformance and in conjunction with the financial and non-financial analysis allows us to focus our attention when working with clients to maximise value
The profit Invariably highlight areas where the business is underperforming and profit could be improved in this particular example we can see that they have almost exactly the correct number of people engaged to generate a $3 million turnover (fairly unusual normally) but that they overspent on overheads by proximally $408,000 and that if this was reduced to the industry average for high profit firms would represent a substantial increase in profit.
Most business owners don’t have this information at hand up to date or easily available and in any due diligence exercise this would represent a significant issue documents are often outdated for example employment agreements that went into 10 years ago when the employee first joined have never been updated and are now most likely illegal.
In valuing any business there are obviously several different methods however they all come back to a very simple formula return or profit and the risk satiated with generating net profit. The higher the risk the lower the valuation multiple this is true of businesses listed on the ASX and small privately held companies.
Protecting assets is generally about separating or quarantining risk (and any business contains various risks some more than others all have some level of risk involved and the assets we are trying to protect.For example many businesses are still structured as two dollars shelf company’s with mum and dad being the only shareholders and both operating as directors this is high risk in terms of asset protection inefficient in terms of taxation and it is often made worse when the two dollars shelf company acquires other assets for example the premises or factory the business operates from.
Most business owners are so caught up in the day to day they simply don’t devote enough time to looking strategically at what they actually want from their business.
There are varied exit options available to business owners as we move up into the right to become more complicated more expensive more risky and typically take longer though they do maximise value.
These are the preferred options actually used by business owners to exit.
Income versus equity unless you’re a soccer player for Manchester United your job has no equity value and therefore can’t be sold.Robert Kiyosaki believes J O B stands for just over broke
Solution – proactive and holistic adviceAsk your accountant – what is my business worth today, if I sold it how much CGT will have to pay – is there anything I can do to reduce the tax payable.Small business concessions have a $6 million threshold so if you are approaching that level will consider very carefully whether it’s worth doing something before you exceed the threshold.
Smaller piece of a larger pieTo unlock value you must unlock equity.
Paperless Warehousing Sydney2 owners now working 3 days per week
Since 2008, almost half of
business owners over age 50
have delayed their retirements
due to the GFC.
If you turn 50 today, your life
expectancy is now 32 more years.
of retired business owners do not
have an adequately funded retirement.
Why Business Succession
and Exit Planning?
55% of all business exits are
due to death, disability,
liquidation or simply closing
Covey says “ if you want to have
a successful enterprise, you clearly
define what you‟re trying to
accomplish…. the extent to which
you begin with the end in mind
often determines whether or not
you are able to create a
Australia‟s mid-range market of
companies, with revenues ranging from
$10 million to $250 million are actually the
biggest contributors to our economy .
3.2 M full time jobs.
Generating 33 % of total revenue and
accounting for 1 in 5 dollars borrowed .
Business Survival Rates – 2008/09
Total Number of Businesses
Exiting the Market: 319,867
and Exit Planning
Business, Financial and
Personal goals of business
owners to design and
implement a strategic exit.
• Many plans fall over at this point
• Age & Financial situation?
• Internal succession funding
• Equity Partner / Investor
Did you know that over 72% of Gen Y
want to own their own business…
but not on their own!
Ladder to Equity
2. Incentive – commission
3. Profit Share - % profits
4. ESOP – Equity
5. Control / Management
Peak Performance Trust
A structure to allow
employees to think and act
like business owners by
matching the performance of
the business with their ability
to build equity.
Peak Performance Trust to fund:
• Profit share based on performance
• Profit used only to fund purchase of
business by same key employees
• Employee retention
• Improved performance and increased
August 2011 –
Archer accepts $1.2B for MYOB
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.
Siri wasn’t made in Cupertino. It was
actually acquired in a deal rumoured to be
worth close to $200 million.
It only took only one phone call to
turn Siri's Dag Kittlaus's life around.
Before the call, he was the head of a
Silicon Valley start-up and
afterwards, he was a multimillionaire
working with Apple.
The total value of transactions increased 35% over the
previous year to US$736 billion.
8.8 * EBIT average
@ 2 x = $1 million
@ 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
Net proceeds is the important $
CGT – small business concessions.
Structures – who owns assets – before and after
Other costs - legal, accounting, other fees.
Client Case Study:
Real estate office in NSW
Combined commercial office and residential sales : Central Coast
Not in a rush to exit
Business Value approx. $2.4 m
Client Case Study:
• Implemented Peak Performance Trust
• Engaged and motivated 5 key staff with equity plan
• Reduced risk – staff retention
• Asset protection & risk management
• Tax and CGT advice
• Wealth outside business structure
• SMSF to hold appreciating assets
• Risk minimization
• Insured for unplanned events
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
• Pre-documented sales programmed over 8 years
• Maximum Equity Value for outgoing shareholders
• Motivated Staff – with a predetermined program to transition
- Ladder to equity
• Recruitment / retention tool
• Accelerated thru initial sale to Austbrokers
Client Case Study:
C-Mac GM Steve Grylak, with the national
award for best ESOP for SME’s /
Succession at the Employee Ownership
Conference and awards dinner last Thursday
10th May. C-Mac has bucked the growing
national SME trend to wind up on owner
retirement (The Exit Generation Needs Help
– SMH 19 Sept.2011) with the introduction of
an employee owned share plan ( ESOP)
offered to all its employees. The engagement
of employees as owners has already seen an
18 % hike in productivity at the plant.
Client Case Study:
Clearwater Filter Systems
Sale of a family owned private company at 9.5 times earnings to JWI.
• 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”
At start of engagement ( August 2011 ):
• Heavily reliant on the three owners
• Owners frustrated at staff disengagement
• Unclear about the vision and future of the business
• Owners goals - semi-retire while continuing to grow the value of their business
• Owners personally exposed to potential liability
• Overall strategy & vision defined
• Improved people management & communication
• Ownership Thinking implemented – move towards a business of business
• Non-owner GM appointed to take the business to the next level and reduce
the reliance on owners
• Staff understand and are aligned with the vision and
• Management and staff are clearer about what‟s expected of them
• Staff are in the loop of what‟s going on in the business through monthly company-wide
• The two owners who are closest to their planned retirement age have appointed and are
grooming their successors
• All employees have been educated in business ownership, are now receiving information
about the performance of the business and will soon have a self-funded incentive plan to
replace their „christmas bonus‟
• Less „me‟ focus and more „we‟ thinking in the culture: phasing out entitlement and bringing
staff on-board to a culture of purpose, visibility and accountability
• Employees are sharing the insomnia and stress of running the business
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