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These are the hard facts: Australian Business Brokers sold just 2.4% of 82,000 businesses that were offered for sale in 2013, while another 16,000 closed their doors and walked away*.

According to the latest Australian Institute of Business Brokers (AIBB) Report, during the 2013 calendar year, business brokers throughout Australia evaluated over 84,000 businesses offered for sale, but sold less than 2,000*. At the same time, 16,000 small businesses closed their doors and the owners walked away**. The AIBB reports it’s a ‘buyers market’ with more businesses for sale than there are buyers. Most business owners who were counting on that sale for retirement are finding  dreams of building a multimillion dollar company quickly fading away. They face the harsh reality of having to stay in the workforce or greatly reduce their standard of living. Things are expected to get even tougher! *Source: Australian Institute of Business Brokers (AIBB), in their September 2014 report **Source: Melbourne Herald Sun August 07, 2013

They’re calling it the Baby Boomer Tsunami!

Selling your business could be harder than you imagineIt’s estimated that around 80% of Australian businesses are owned by baby boomers– and many will be wanting to sell them to fund their retirement over the next 10 years as they reach their 60’s and 70’s. It could be a tsunami of businesses for sale. So given that just 2.4% of businesses are successfully sold in today’s market, what percentage are going to sell when the market becomes awash with businesses for sale? Most business owners are unprepared for a sale – in fact even though business owners have most of their assets tied up in them, only 39% actually make a profit, the rest are breaking even or running at a loss. A study in 2010 by InformationWeek found that only 10% of business owners consider their business either ‘prepared or well-prepared’ for a sale. That leaves a lot of people relying on a lucky break for their retirement! And with supply soon to exceed demand, only businesses that are well structured for sale have a chance of giving their owners the million dollar payday they are anticipating…

The plight of Australian retirees is alarming

To retire comfortably on say $100,000/year, you probably need $2 million locked away and be earning reasonable interest on it. The top 1% of Australian retirees average only half that amount and the others have far less. According to the Australian Bureau of Statistics, the average retiree aged 60-64 has just $155,000 in superannuation and the average retiree aged 65-70 has less than half that. If this trend continues, most Australians will live out their golden years in abject poverty, unable to do any of the activities they had hoped to do in retirement.

A good exit strategy is Essential to ensure the sale of your business!

An exit strategy is something that most Australian small to medium enterprises struggle with. A study by Pitcher Partners and Swinburne University found that 75% of Australian business owners have no exit strategy whatsoever. The AIBB report supports this, with brokers reporting a “scarcity of quality listings available”. Of the enormous number of businesses being offered for sale, most cannot be listed, due to the number of hours the owners work and the lack of profitability” An exit strategy that includes adequate preparation of the business for sale, systematisation and building ‘asset value’ within the company will usually ensure that the business has a much better chance of being sold and sold at a much higher price. The chart below shows the prices paid for differently structured businesses at multiples of their profit (EBIT – Earnings Before Interest and Tax) Businesses with a planned exit strategy will fetch a higher price Source: Sydney Morning Herald As you can see from the chart, a business owner who takes the time to systematize their business and build ‘asset value’ through a good management team, good contracts with staff & suppliers, and consistent returns can expect a sale price which is 2-3 times that of the average price paid. An owner who goes even further and identifies a corporation who can leverage their IP, client list or products to make greater profits, can expect an even higher price and the best chance of a sale.

Learn to build a multimillion dollar business

Just having an exit strategy is not enough – it must be implemented and unfortunately, only 10% of business strategies are effectively executed. Streetsmart CEO Ian Marsh says: “The reality for most business owners, is that if you’ve got 10 staff, 7 of them don’t give a damn – so if you’ve got things you want to execute, they don’t get done. Before you can effectively begin to implement an exit strategy, you must get the right people on your team and that may take some changes. To help you get started on the right path, we’ve created a four part video series to take you through the essential steps to prepare your business for a sale. This will help you make your business stand out from the competition and becoming the obvious choice for any buyer, giving you the best chance of building a Multimillion Dollar Company.

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