Business owners approaching retirement are facing serious problems to realise their expected value for their businesses according to BizExchange Chairman David Bird.
His view is based on current market conditions and major demographic factors.
Key findings of the latest (June 2013) BizExchange Index reveal-
1) a record volume of businesses for sale
2) values remain stable but flat (nearly 50% have PE ratios between 1 and 2, and
3) businesses are taking longer to sell.
A change of government may reverse the current negative sentiment pervading the market e.g. leading professional firms are experiencing a major downturn in work with a net 70% of firms believing business conditions are negative.
Mr Bird pointed to a recent RMIT – MGI survey which revealed that family business owners aged 60-69 years constituted 37% of owners, up from 21% in 2010 and those aged 65 and over rose to 25%, up from 12% in 2010.
This would lead to a significant over-supply problem when these owners look to sell out.
To avert a crisis situation older business owners need to implement a workable succession plan if they have not done so already.
It will be crucial that they investigate their exit options which would include:
- Outright sale – to supplier, customer or competitor
- Partial sale – terms sale or sell down to employees
- Float – on minor exchanges NSX, APX or ASX if large enough.
Now was a good time to start planning because the eventual sale is likely to be into a recovering economy under which values should be more buoyant and bank lending to purchasers more aggressive..