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Preparing Your Business for Sale

David Wells
David Wells
REINZ Accredited Business Broker

In my view, small businesses are what turns the wheel when it comes to the New Zealand economy.

When you consider the contribution to GDP at 28% and the 600,000 jobs created by small businesses it is difficult to argue otherwise. The ongoing success and growth of the sector is vitally important to our country’s economic wellbeing, and it is hard not to ignore the social benefits that this brings. In fact, 97% of businesses in New Zealand are small businesses.

Running a small business is hard work, and often requires long hours. It can bring challenges and rewards but one clear question sits at the end of this journey, what happens when you decide to sell? Is this a calculated decision or one made for other more urgent reasons, such as a health scare?

A recent survey conducted by Xero found that almost 10% of business owners would like to retire in the next year. Statistics New Zealand numbers suggest, up to a quarter could leave their businesses in the next 10 years. In many conversations that we have with business owners we find that hardly any have a succession plan, which means:

  • They are unlikely to get the best price for their business
  • Their retirement and standard of living may suffer as a result
  • The buyer may have a harder time making the business succeed

Transitioning from business ownership and making the decision to sell your business is a massive decision that can have huge impact on ones life. It can be overwhelming and for some is an emotional roller coaster. The adverse effects can be procrastination and in the end poor decision-making.

Small businesses employing fewer than 20 employees make up the majority of businesses in NZ. They employ 29% of our workforce, and more than 90,000 businesses in this country, are owned by people aged 55 years and older. If these business owners look to exit without a succession plan it is less likely the business will thrive under new ownership, and this will lead to vulnerability, which could have adverse effects for the wider New Zealand economy overall.

Our tips for a successful exit:

Form an Exit Strategy

The importance of planning is critical. You have to think about who your buyer is. This could be an employee, a family member, or a third party otherwise known as the highest bidder.

Prepare For Sale

This can be a long drawn-out process. Just like selling a house, there is a lot to prepare before the sale process even begins. Have you had an appraisal? Does the value meet your expectations or is there work you need to do to get your financial accounts in order to ensure you get the best price possible based on the true performance of the business?

Take the Business to the Market

Owners rarely are able to put together a campaign that outlines the opportunity that the business represents to prospective buyers. They often don’t know when to get a broker involved, or how negotiations play out. This means potentially leaving money on the table unnecessarily at a time where they should be reaping their rewards to the fullest extent.

Not having a succession plan can greatly diminish the sale price of your business. Most small business owners leave their businesses in their late 60’s and many current business owners in New Zealand will reach their late 60’s in the next decade. How many of those will leave money on the table?

If you are thinking of selling your business and would like to have a confidential chat please call us in confidence on 09 486 9250.

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