Reviewing your business for the next phase
At some stage in every business owner’s life the realisation hits – something needs to change! Is it time to call it quits, sellup, move-on, retire, do something different? Or should I look at growing the business?
Many business owners, senior managers and key personnel will be analyzing their situation and contemplating the options – to grow or to go? Yes, that is the question.
So what options are available and how do you tackle such a major undertaking while still running the business on a daily basis? We canvass some considerations and implications for you.
Surprisingly, some of the same strategies actually apply to both ‘go’ and ‘grow’ under the umbrella of ‘Optimising Your Business’ – whether you want to exit your business or grow it through structural changes.
Exiting Your Business
From a business owner’s perspective, exit can take the form of business sale, business closure or changing ownership or management by way of a merger, takeover or succession process.
Closing a Business
Business can be forced to close under a range of circumstances – voluntary and involuntary. Closing a business can be a timely and very detailed process and consultation with financial and legal advisors is advised and a plan put in place to ensure the best interests of yourself, employees, suppliers and other stakeholder are addressed and you receive the best financial outcome.
Selling a Business
When it comes to selling a business, there are many great business brokers who will be more than capable to handle the sale and advise you through the process. However, first consider the implications of going ‘straight to market’. You want the best price for your business and to achieve that, everything must be in the best shape possible. You don’t take your car for a trade-in without washing and polishing it, so why would you hang the ‘business for sale’ sign before you optimise your business. Alerting suppliers, staff and customers to the sale can have adverse effects on the business and effect the sale price. So before you contact the broker – optimise your business.
Change of Ownership Options
There are a number of alternatives to a direct sale, which may allow you the option to exit the business over a period, while retaining the viability of the business, an income stream for yourself during the transition and give the business a renewal.
Many Australian SMEs are family-owned so having a succession plan is a wise strategy. Each business will address this in their own way, but many experts advise a formal written plan be established to ensure transparency, a smooth transition and clarification for all stakeholders.
The Australian Government website www.business.gov.au provides a succession plan template and guide.
If no successor is apparent, then a merger or bringing in a new partner is another option to consider. This strategy has a two-fold benefit in allowing you, the business owner, to plot an exit strategy over time while presenting the exciting possibility of breathing new life into your business for growth. Possibly making it an even more attractive financial outcome for you when you do finally depart the day to day operations.
DIY or DDIY?
Whether you want to go or grow, the first question you need to consider is whether you want to handle the entire process yourself, DIY style or will you opt for DDIY, don’t do it yourself, and bring in external experts?
The Australian Government website www.business.gov.au offers some detailed information and guidelines, and a good source of ideas and links for an objective point of view on business exit strategies and critical issues for consideration. Topics covered include Planning Your Exit, Selling or Closing your Business and How to Exit.
Also consider building the public image and profile of the business by seeking publicity; improve your human resources by training staff; review equipment and machinery so the business is well-equipped; and improve the physical appearance of your business, i.e the building premises, to present the best image of prosperity to potential buyers and customers.
But what are some of the implications of the DIY process? For a start, do you have the time to devote to such an involved, timeconsuming and long process and still effectively run your business? It can take 6 months or more to sell a business and your business needs to be in top shape, a viable operation to attract the best price and outcome and that probably means you being at the helm.
Michael O’Connell, of A S Fisher & Co, a business optimisation specialist, works with SMEs on the ‘go or grow’ issue and puts a strong case for bringing in the experts.
“Most SME owners are busy enough running the business and tend to focus on their products and services rather than standing back and taking a more objective view of the opportunities presented by developing their business model,” Michael said.
“Whether considering sale or growth, we regularly see better outcomes achieved by engaging with specialists than when business owners proceed on their own.”
Optimising Your Business
Michael O’Connell explains that before embarking on the sale or growth process, businesses should consider optimisation and that essentially involves change. Not an easy process to implement in many SMEs and bringing in an outside, objective expert with detailed analysis and considered methodology offers both short and long term benefits.
“In the end, the business owner wants the best price or to increase the overall value of the business. To achieve that, we take them through an optimisation process which involves a comprehensive range of operational, HR and structural issues,” Michael explains.
While the experts handle the optimisation process, the owner is left to maximise their time on running the business and implementing the plan developed for them by Michael and his team. If exiting the business is the desired outcome, they can handle the sale through a discreet process.
“Selling a business is quite a timely process, which could take 6 months or even longer,” Michael said. “There are significant advantages to keeping quiet about selling your business which include not alerting your competitors who may undermine the process by luring customers and staff away and unsettling suppliers or financiers, both of which may impact the value.”
To assist you to get started, Michael O’Connell offers Smarter Macarthur readers a free Business Optimisation Systems Support – BOS Support document available at www.asfisherco.com and Australian Government resources are also available at www.business.gov.au to assist you in assessing your options.