Business owners are seeking exits without a plan, survey finds

Accounting firm William Buck warns most owners are “flying blind” when it comes to maximising the value of their business at the point of sale.

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Small business owners are planning to sell up without having exit strategies in place, leaving them unable to maximise their business’s value or tax benefits, according to accounting firm William Buck.

The mid-tier firm’s Exit Smart Report surveyed 300 small-to-medium business owners and C-suite executives and found that just one-third of respondents had an exit strategy in place.

 

Despite this, the report said that “short-termism” emerged as a common theme among survey respondents, with 43 per cent of owners saying they wanted to exit in the next five years. Only 28 per cent were expected to be at the helm of their business in the next 10 years.

 

“Remarkably few business owners see their business as a long-term proposition,” the report said.

 

Looming retirement was identified as the primary trigger for 42 per cent of business owners to consider selling their ventures. They were also willing to seize opportunities for an earlier exit if they arose.

“Three out of five (62 per cent) [business owners] say they would sell their business if they received an offer, or if strong market conditions make it likely they could achieve a high value for their business,” it said.

“Of course, the likelihood of this happening varies depending on the health of the business and the economy.”

As a result, businesses needed to be “exit ready at any time”, the report said. “Business owners need to be mindful of an exit strategy – just in case an unexpected purchase offer arrives.”

One in five respondents said they would exit their business as part of their family’s succession plan.

But even for owners who expected the business to remain within the family’s control, good succession planning would ensure smooth ownership transitions and minimise the risk of disputes arising, the report said.

"In a family handover, it pays to start early to resolve any issues and ensure family harmony is maintained so that each family member is engaged, understands, and agrees on the transition process.”

The report found that two-thirds of business owners have not had their business independently valued in the last three years, and 20 per cent of business owners who wanted to sell did not know who their likely buyer would be.

“A lack of awareness on how to maximise the sale value of their entity, or even who would buy the venture, is setting up many owners for a less-than-optimal exit outcome,” the report said.

“This leaves owners flying blind as to the true worth of what is likely to be one of their most valuable investments, and commercially how a buyer would structure the purchase.”

Tax structuring was also deemed an area of “significant oversight”, with 59 per cent of respondents admitting that they had not given any thought to the tax implications of a future sale.

“A broad swathe of business owners could lose a large portion of any sale proceeds to tax in the event of a sale,” the report said. “However, it is a downside that has the potential to be structured effectively with the support of quality advice and forward planning.” 

Head of corporate finance Mark Calvetti emphasised the importance of planning early to ensure the best chance of a successful sale.  

"Some of the most successful exits we've seen were planned at the time of purchase," he said.

To achieve maximum value from the sale process, Mr Calvetti recommended that business owners begun exit planning at least three to five years before they expect to exit.

“The process of selling usually takes between six to 12 months and includes planning, preparing an information document and identifying likely trade and financial buyers," he said.

 

 

 

 

Christine Chen
30 October 2023
accountantsdaily.com.au

Mark Lisle

Mark Lisle

Mark is our managing partner and has been with the firm for over 36 years. He brings a wealth of experience in all areas of our business, including business advisory, taxation and self managed superannuation.

Mark’s ethos is that good advice stems from working closely with our clients and being prepared to go that extra step to assist them in meeting their goals and optimising their financial position.

Mark is a Fellow of Chartered Accountants Australia and New Zealand, an accredited SMSF Specialist and a registered SMSF auditor.

Outside of work, Mark enjoys trying to keep fit and spending time down at his “second home” in Port Fairy.

Josh Laing

Josh Laing

Joshua began working at Rundles in 1999 whilst still completing his Bachelor of Business (Accountancy) degree at RMIT. After graduating in 2001 he was admitted to the Institute of Chartered Accountants Australia and New Zealand in 2004. Joshua spent two years working in London before returning to Rundles in 2006.

Josh has a wealth of knowledge across a broad range of industries as well as in Self Managed Superannuation. Josh enjoys working with family groups and businesses to ensure they’re structured correctly to maximise asset protection, succession planning and management of tax.

Married with 2 children, Josh spends his weekends with his family and following the Tigers.

Brad Roach

Brad Roach

Brad has been a part of the Rundles Team since 1996 and became a Partner of the firm in 2014. During his time at Rundles, Brad has developed a strong relationship with his clients across a wide range of industries and is dedicated to assisting them to reach their personal and business goals.

Brad is passionate about seeing his clients succeed and utilises his extensive experience in public practice to provide a holistic service to his clients. He also has a wealth of experience in superannuation, particularly self managed superannuation funds.

In his spare time, Brad likes to play a round of golf with friends and enjoys watching his two sons play various sports.

Peter Davison

Peter Davison

Peter graduated from RMIT with a Bachelor of Business (Accountancy) with distinction in 1976. He joined Rundles upon graduating. Peter has been a member of the Institute of Chartered Accountants since 1979 and a Fellow since 1991. As an active yachtie of many years, Peter can often be found on the water. Otherwise, he and his wife spend time with their friends and extended family.

Sandy Gilbert

Sandy Gilbert

Sandy was admitted to the Institute of Chartered Accountants in 1973 and has been a Fellow since 1983. He gained extensive experience in auditing and accounting services over seven years at Pannell Kerr Forster before joining Rundles in 1973. Sandy is married with three children. A former amateur footballer of some note, Sandy is still an avid follower of the game and enjoys weekends at his country retreat.