1. Maximising value through Business Exit Planning
Rob Jagger
Maximising value through Business Exit Planning
Thanks Jenny for your kind introduction, and good morning all. It is a privilege to be here with you at this spring morning, and my intention today is provide insights about how to build your business into a valuable and precious asset that you could sell.
Business exit planning is all about optimising your business to maximise its value before managing a successful exit or sales process.
Let’s take a couple of minutes to see who is here in the audience.
Raise your hand if you own a business?
Can you keep your hand raised if you have been running for business for 5 years or more?
Can you keep your hand raised if you have been running for business for 10 years or more?
There has been a lot of hard work and sacrifice in this room.
Raise your hand if you would like to sell your business one day?
Can you keep your hand raised if you want to sell your business within the next 10 years?
Can you keep your hand raised if you want to sell your business within the next 5 years?
Whether you want to sell next year, a decade from now, or use it to generate passive income you need to turn your business into a valuable asset.

2. Drivers of Business Value
After extensive quantitative market research with business owners and M&A experts,
the value of business was assessed to be a mixture of:
it’s profitability
the potential for future potential growth
how risky the business is
These factors have been broken into these 8 key business value drivers. Any business can be reviewed against these factors to produce a measure its value.

3. When is the best time to sell?
This occurs when both the financial performance and growth potential are at their maximum, which is at the at the end of the growth phase.
If this opportunity is missed, the next best time is in the maturity phase, as financial performance is still high although growth potential is now flat.
Unfortunately many owners wait until the decline phase before actively exploring a business sale, but here financial performance and growth potential is falling fast.
Now I know that some of you are thinking that your are too busy and don’t have time to focus on improving your business value. The question you should consider is whether you want to be in a situation in 5 or 10 years where you have nothing to sell as your business is well past it’s best before date?

4. Business Exit Options Retain for passive income Family Transition
Sale to Other Shareholders
Sale to Management or Employees
Sell the Business to a Third Party
Liquidate the Business

5. Business exits are difficult!
Reasons why include:
75% of business owners do not have a business exit plan.
52% of business owners are relying heavily on the sale of their business to fund retirement.
Note - 80% of businesses do not sell as they not structured to attract potential buyers.
It can be difficult to manage your business exit for 2 key reasons.
Firstly most business owners do have a plan to help them through this process and end up stumbling through
Secondly buyers are not interested in businesses with too much risk
The telling point here is that 80% of businesses do not sell, leaving the owner with no choice but to walk away. This is primarily due to the business not being structured to attract potential buyers.
We have heard about the drivers of business vale, the different stage of the business lifecycle and the difficulties in achieving a good business exit, -
So what is the answer?
Source: Aust. Centre For Family Business at Bond University

6. The Exit Planning Process
Now I would like to give you some insights into the Exit Planning process.
It uses a proven 4 stage process to help owners maximise the business value obtained from a business exit.
Stage 1 is where the blueprint is developed to guide your business through the full exit process. This utilises extensive questionnaires and interviews to identify the key business and personal action items required for the business exit process.
Stage 2 is where the the foundations are made strong to protect wealth inherent in the business for the owner. This focuses on items such as financial planning, estate planning, as well as taxation, business structure and insurance reviews. You will hear about some of these requirements in more detail from Lawrence later.
Stage 3 is where incremental business value is generated. Key business value drivers such as key person risk, over reliance risk, cash flow risk and differentiation risk are addressed here
Stage 4 is where your business wealth is unlocked through a successful sales approach. This proactive process utilises competition between interested buyers to ensure that best price is obtained and is similar to a M&A type approach.

7. Exit Planning Pays Off…
A quick slide to show you how exit planning produces positive results.
Our analysis reveals that a business that is highly reliant on the business owner to win customers and manage the daily tasks is highly risky. This typically generates 1 to 2 times Net Profit Multiple and is represented by the blue area in this chart.
In contrast the same business without the reliance on the owner, a management team with accountabilities and well developed systems is less risky for a buyer. This typically generates a 3 times to 4 times Net Profit Multiple and is represented by the pink area in this chart.
The Holy Grail for selling your business is a purchase from a strategic buyer. This occurs when a buyer is willing to pay above your financial value because acquiring your business will give their business a strategic boost in the marketplace. This typically generates a 6 times Net Profit Multiple and is represented by the green area in this chart.
In fact it is often easier to drive up business value by reducing the business value risk drivers than focusing solely on improving the profit.
I know that some owners might be thinking that they can’t afford the cost of the exit planning process. In fact the cost of your investment to move your business value from the blue zone to the pink or green zone may be the best return on investment that you will ever achieve as it effectively is doubling or tripling your business value.