NOW is the time for Baby Boomers to exit their businesses.

Our guest blogger this week is Graham Hoffmann, a Senior Business Broker at LINK Business Brokers.

Before we start, who exactly are ‘Baby Boomers’? 

They were born between 1946 and 1964 and the Baby Boomer generation makes up a substantial portion of the world’s population, especially in developed nations.

One of the most common things I find is that most Baby boomers do not have a good understanding of what their business may be worth in today’s market and yet they are relying on this sale for their retirement nest egg

Baby Boomers business owners have been through several economic roller coasters.  The share market crash in the 1980’s and the Global Financial Crisis (GFC) 2008 to 2011 will bring back tough memories for many.  Seven years on from the GFC and the recovery has been steady in New Zealand with many businesses now enjoying a buoyant economy and the profitability that goes with it.

It can be a difficult decision to sell when times are good, in fact to some, it sounds plain crazy.  However, the best time to sell is at the top of cycle and we’re there now.

One of the most common things I find, is that most Baby boomers do not have a good understanding of what their business may be worth in today’s market and yet they are relying on this sale for their retirement nest egg (see our last blog).

If you’re not convinced that now is the right time, how is your health?  By hanging on to the business, they risk ill health driving a business owner into a “fire sale” situation.  When you’re forced into that quick sale situation, often there is no strategy in place which frequently results in a lower asking price or worse, business closure.

So, better to have an orderly exit plan.

There are two main reasons why Baby Boomers should seriously consider selling their business now.

  1. The large majority haven’t put aside additional savings and are relying on the sale of their business to realise their retirement investment. With a lot of business owners approaching that Baby Boomers demographic, there will inevitably be more businesses on to the market in the next few years, making it harder to stand out in the crowded market place.
  2. It is the younger generation that will be looking to buy the stand out businesses in an open market.  Some of these buyers are looking at exiting a corporate environment and have good understanding of financially and technical influences.  These young budding entrepreneurs are also very knowledgeable about market conditions and opportunities.  The businesses they want are already performing well but have potential to improve given the right management systems.

At present, there are more buyers than good businesses for sale so it makes sense as a Baby Boomer business owner to capitalise on this.

If you are considering selling your business, here are a few points to help improve the saleability of your business:

  1. Get an appraised market value, don’t rely on an ‘accounting’ value. This will give you an up to date market value of your business to help you in the decision-making process.
  2. Financial Records. Get your financial records in order and keep them up to date monthly.  This greatly assists the sales process because; if purchasers have to wait for the company accounts to be completed, they can lose interest.
  3. Document business processes and systems. This should include the accounting system, payroll system, employee manuals, CRM system, sales and marketing processes, health and safety manual.
  4. Asset Register. Review and update the asset register on a regular basis to ensure the items are accounted for and are in good working order.  Now is the time to quit surplus and non-operational assets or repair them.
  5. Stock/Inventory. Constantly assess old and obsolete stock, don’t accumulate these items otherwise they it will impact negotiating your sale price.

Get ready!

Getting your business ready for sale requires an experienced business broker to assess your business honestly and assist you with advice to maximise its value on the open market.

An experienced business broker will work with you to achieve this as they will have all the facts, figures, historical sales data needed.

Times are good, interest rates low, banks have money to lend buyers and the economy is still showing growth.  NOW is the time to act.

Graham Hoffmann: [email protected], or you can reach him on 0274 936 411

If you would like to talk to us about your money, click this link to book a complementary strategy session with us.  Or just contact us here.