A new report by William Buck has found that many small-to-medium enterprise (SME) businesses in Australia and New Zealand are set to lose big on returns when exiting their business. The report, titled “Exit Smart Report 2023,” surveyed a wide cross-section of business owners from a variety of different industries.
One of the key findings of the report is that nearly 72% of small-to-medium business owners are looking to exit their business within the next 10 years, while 43% expect to exit in the next five years. However, the report also found that 64% of business owners who were surveyed have not had their business valued in the last three years.
This lack of planning is concerning, as it suggests that many business owners are not taking the necessary steps to maximize the value of their business when they exit. Mark Calvetti, Head of Corporate Finance at William Buck, said that business owners should start planning for their exits at least three to five years before they actually expect to exit. This time frame allows owners to make any changes to a business that will improve its performance and make it more attractive to potential buyers.
Key Finding from the Exit Smart Report 2023
- Nearly 72% of small-to-medium business owners in Australia and New Zealand are looking to exit their business within the next 10 years.
- 64% of business owners who were surveyed have not had their business valued in the last three years.
- Nearly six in 10 business owners do not have an exit strategy in place and one in two have never sought advice on maximising the value of their business.
- More than 40% of owners have substantial concerns about being able to find a buyer for their business and receiving their desired sale price.
- 47% of business owners point to a trade sale as their most likely exit strategy, while more than 28% said they would consider selling to management and more than 25% we’re likely to sell to private equity.
- Over one in four assume the business will be handed down to the next generation of family members.
The report also found that the most likely exit strategies for SME businesses are trade sales (47%), selling to management (28%), and selling to private equity (25%). Over one in four business owners also assume that the business will be handed down to the next generation of family members.
Advice for Business Owners
If you are an SME business owner who is considering exiting your business, there are a few things you can do to prepare:
- Have your business valued. This will give you a good understanding of what your business is worth and help you to set a realistic sale price.
- Develop an exit strategy. This document should outline your goals for the exit process, as well as your timeline and preferred exit strategy.
- Seek professional advice. An experienced advisor can help you to navigate the exit process and ensure that you maximize the value of your business.
Exiting a business can be a complex and challenging process. However, by planning ahead and seeking professional advice, SME business owners can increase their chances of a successful exit and maximize their returns.