Business owners plan to walk away

Less than half of Australian small business owners have a plan to realise the value they’ve built up in their businesses, according to a new report from Commonwealth Bank Local Business Banking.

The Commonwealth Bank Local Business Owner Report shows that only 47% of small business owners have an exit strategy, such as selling their business. Of those with an exit plan, 22% simply intend to close their doors and walk away.

Even more surprisingly, 60% of business owners planning to close their doors are still actively reinvesting profits back into their businesses. Half are also working over 50 hours every week — 13 hours more than the national average of 36.9 hours.

The problem is at its worst among business owners aged 60 or over, with one in four planning to close the business. At the opposite end of the scale, two thirds of Generation Y owners have already made plans to sell their businesses outright.

Arnie Selvarajah, General Manager of Commonwealth Bank Local Business Banking, says, “It’s alarming that so many small business owners are prepared to walk away from the businesses they’ve worked so hard to create — especially when they’re still ploughing a significant amount of time and money back into them.”

“An issue for many owners is that their businesses are dependant on their personal presence, making them difficult to sell”, he said. “Small business owners should plan ahead if they want to build a saleable business and capitalise on their hard work.”

“Simply making a profit is not enough. Owners should be putting systems in place so that others can reproduce their success and new owners can easily step into their shoes”, he added.

“It’s critical to plan for the entire business life-cycle. That way you can determine the best growth and investment strategies, and get the most out of your business.”

Seven tips for building a saleable business

1. Plan ahead. Plan to make your business saleable right from the start. Look at other businesses for sale, then think about what potential buyers might want.
2. Build systems. Put processes in place so that everything works smoothly, even when you’re not around. Your business will be more efficient, and a new owner will find it easier to step into your shoes.
3. Document everything. Keep detailed records of your systems, your plans, your marketing strategy and your customers. It’s all valuable intellectual property that could be worth real money to you one day.
4. Dig a moat. Carve out a unique niche for your business with a distinct competitive advantage — what Warren Buffet calls an “economic moat” to guard you from your competitors.
5. Have a unique selling proposition. Your unique selling proposition is what differentiates you from your competitors — and makes your business uniquely desirable to a buyer.
6. Recruit outstanding people. Invest in outstanding staff who can keep the business running without you. Then, having recruited them, share the knowledge around.
7. Get advice. Professional advisers, such as your accountant, your business banker, or a business broker can help you get the most out of a sale.