Data from Statistics New Zealand has revealed that almost 20 percent of all small business owners in New Zealand are planning to retire in the next 10 to 12 years. Yet despite the significant proportion of small business owners planning to retire, most of them don’t have a plan for selling their business.
When small businesses eventually decide to sell they find that the process is much harder than they predicted and the sale price does not reach their expectations. It’s a bit like the rush of buying presents on Christmas Eve, there’s no guarantee that you’ll end up with the presents you want and by then it’s too late.
Start planning now
Most business owners only seriously start considering leaving their business when illness or some other life event forces their hand. Often this results in a hasty exit strategy which can be a lose-lose scenario for both the seller and the incoming owner. The owner may end up with a lower sale price than expected and the new owner may walk into a business with unclear processes and out of date books. It can take two to three years to prepare a business for a successful change of hands so it’s never too early to start considering the process.
To ensure you can spend your retirement the way you want, consider these tips on being well prepared for the sale of your business.
1. Get your advisor on board
It is critical to talk to your accountant or bookkeeper as they’ll be an important reference point when considering your options. Your accountant or advisor knows your business inside out and they can help you with forming an exit strategy and getting the business ready for sale. You don’t need to go through this process alone as they’ll be there to provide you with expert advice and guide you through the entire process.
2. Get your books in order
Work closely with your accountant or bookkeeper to make sure your books are ship shape. Having your books in order is a priority because prospective buyers want to know how your business is performing, where your customers and target customers come from and what products are in demand etc. With online accounting software, this is easy to manage effectively.
3. Will you stay or will you go?
You may want to stay involved in the business after you’ve transferred ownership. If you’ve kept the business in the family you might want to remain as an advisor, so discuss the possibilities of remaining as a shareholder or director with your accountant.
4. It’s more than just the numbers
Selling a business that you’ve given your blood, sweat and tears to is no easy feat. It’s no doubt been your passion for some time and so you’ll have mixed emotions about selling the business. Give yourself time to come to terms with leaving the business.
So don’t delay, start working with your accountant, bookkeeping or business advisor today.
If you’re an accountant or bookkeeper, we’ve produced a report – in conjunction with representatives from a working group – to help you have the right conversations with your clients so you can both start the planning process today. To view and download our report, Success through succession planning head over to our dedicated webpage for succession planning.