This document discusses opportunities for business advisors to help small and medium business owners transition out of their businesses over time rather than an outright sale. It introduces the Platform 1 model which brings in executive management to take an equity stake in the business, allowing owners to step back while maintaining income and ownership. This provides continuity for the business and clients. Case studies demonstrate how the model has helped business owners achieve growth and optimize value from their businesses through gradual transitions.

1. “Turning Business Owners into
Business Investors”

2. The SME market
• The New Zealand economy is made up of around
95% small and medium sized businesses.
• It generates upwards of 40% of economic output
and is 30% + of the work force.
• It is dominated by an aging “baby boomer”
dynamic. (The average age of farmers is 58 and
similar to SME’s).

3. The SME market
• One way or the other these businesses will change
hands in the coming years.
• The “changing of the guard” will have both positive
and negative impacts to service providers.
• Proactive approach to this unfolding dynamic can
benefit clients and service providers alike.

4. The SME market
In a recent SME survey over half of respondents
favoured a gradual sell down, rather than an
outright sale.
• A better path to optimising value.
• Reduced risk by:
– Enabling the ability to “take money off the table”
– Stepping back and better balancing lifestyle.
– Working “in” not “on” the business.

5. The SME market
• Although many owners preferred a partial sell down,
most believed a trade sale was the only real option.
• Awareness of alternative options very limited.
• Understanding of where to seek this advice primarily
residing with CA’s as their business advisor.
• CA’s using traditional transition models and internal
expertise to support this outcome, mostly modelled
on sale of business or family succession.

6. The Platform 1 model
“Turning Business Owners into
Business Investors”
• As an alternative to a trade sale.
• As an alternative to selling an on going, income
generating asset.
• As a means to grow the business, while also creating
the ability to step back.

7. How the Platform model evolved
Saturn Group
International & NZ
Trends and Research
Director & Executive
Placement
Market Need Market Need
Learnings &
Process
BANKS SME’s
30+ Leadership &
Equity Transitions
Completed

8. How it works
• Bring in Executive Management (e.g. GM) to
company.
• Support both equity transition and personal
transition.
• Value company prior to new structure.
• Owner releases equity. (25% is standard model)
through “agreement to agree.”
• Timing usually 12-18 months.

9. How it works
• Support new ownership structure through Advisory Board.
• Create continuity with existing financial suppliers.
• Help develop KPI’s around business growth, efficiency and
process.
• Provide interim governance in support of management and
equity transition.
• Provide clients with legal and employment templates.

10. Who we work with
• SME clients who are profitable.
• Have a good upside.
• Have unrealised potential to grow.
• Have a fundamentally strong structure.
• Will benefit from a Leadership Transition approach.
• Have shareholders looking for an option to a trade
sale.

11. Current Leadership Transitions
IT Industry – Enterprise solutions, mobile/app
connectivity.
• $8m+ T/O.
• Profit - $1m.
• Value $3.5m.
• Founded 1984.
• Two Director/shareholders, 51%/49%.

12. Current Leadership Transitions
• Majority Owner wishes to step back, retain Mentor/Director
involvement.
• Enjoys the business and nature of forward looking technology
innovation.
• Wishes to maintain on-going growing income.
• Requires a GM with option to buy equity.
• Initially 25% and continue growth of company.
• Greater shareholding available.

13. Recent Leadership Transitions
Market leading home builder - 2003
• Turnover around $12M.
• Franchisee also has master franchise in Victoria.
• Needs a capable leader to run NZ operation and grow the business, freeing owner up to grow
his Australian business.
Result
Saturn appointed a GM who took 25 % after 18 months and then worked up to 45 % over 10
years. Business now doing over $30M, top franchisee in the world 4 of last 5 years and
significantly bigger than it was and more profitable.
Owner now has 13 franchisees in Australia up from 2 in 2003.
2013 Update
With the exit to the master franchisor in NZ of the GM, after 10 years, we have just repeated the
process.

14. SUMMARY
• Opportunity for Saturn and Platform 1 to offer clients
a toolbox of solutions for future exit.
• Business continuity and growth.
• Opportunity to own a business without having to buy
outright and with less risk - also the business has
enough scale to generate sufficient income to repay
debt.

15. Contact
Geoff Shaw
Saturn Group
geoffshaw@saturngroup.co.nz
DDI: 09 358 7412