Craig West

As stock markets and economic indicators locally and across the globe continue to improve and whispers are getting louder that things are getting better, now is the time for SMEs to plan for the year ahead and especially, for baby boomer business owners to revisit their succession prospects and exit aspirations said Succession Plus CEO Craig West.

One of the interesting things observed by West has been the dramatic increase in mergers and acquisitions, capital raising and IPOs for Australia’s major corporates (largely listed companies).  “The level of activity has increased quite dramatically over the last six months and if you read any of the financial press regularly it is not unusual to find a story about a private equity firm making an acquisition, a new listing being announced, a merger between two major businesses or other corporate activity”.

“This kind of activity has not been seen in the market at anywhere near this level for several years (and probably not since the GFC)”.

This is significant as the private capital markets (corporate activity, acquisitions, et cetera with Succession Plus’s typical clients) will generally lag approximately 12 to 18 months behind the ‘big end of town’.

“Whilst in our sector of the market we have already seen an improvement in activity (partly led by the increased availability of capital), we can expect this increased activity to really peak in approximately 12 months”, continued West.

“This area, like nearly all other investment classes is cyclical and business owners should be doing everything they can to take advantage of this predicted increase in activity.  Contrary to the doom and gloom associated with the oversupply of baby boomer owned businesses in the market and the downward force that will apply on prices – this is simply not our experience, but that comment needs to be qualified by saying that good, well – prepared & successful businesses will always sell (in any market)”.

The opportunity here is to ensure your business is all of those things and therefore attractive to as prospective buyer as the market upswing continues.

West concluded, “Ultimately, the best advice for any business owner at any stage of the business life cycle is to take time and carefully assess all factors in relation to either their business growth or exit objectives.  For those seeking to sell, assess all pertinent data and then develop the strategy to sell the enterprise to the right buyer – at the right time – for the best price”.

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Craig West

The benefits of Australia’s Free Trade Agreements (FTAs) with Malaysia, New Zealand, USA, Singapore, Thailand, Chile and Korea (announced in December 2013 but not concluded) go far beyond the removal of tariffs on goods and services traded between Australia and its bilateral partners said Craig West, CEO & Founder of Succession Plus Pty Ltd, author of Enjoy It-Business Succession & Exit Planning and President of the Australian Chapter of Exit Planning Institute (EPI).

With over 50,000 businesses coming onto the market for sale each year, Australian SME owners should consider these countries as not only export destinations but also as a source of prospective buyers or investors.

Sighting as an example the Malaysia Australia Free Trade Agreement (MAFTA) that celebrated its first anniversary in January, Craig West said the Malaysian Government is transforming the nation’s economy under its Economic Transformation Program (ETP).  In doing so, Malaysia is propelling itself into a dynamic, modern, innovative and globally competitive nation through increased domestic wealth and consumption, as well as commercial success in international markets.

Malaysia also has a thriving SME Sector and together with a rising middle class, high net worth individuals and capital rich companies looking to international markets for new investment opportunities.

Australia is well positioned to capitalise on Malaysia’s economic strategy and the extent to which Australian companies will be seen as a destination for Malaysian investors depends largely on our ability to engage with, and tailor opportunities for the Malaysian market.

“It is not unusual for an Australian business operating in an overseas market to be the focus of investment, merger or takeover interest by local businesses and competitors,” said Craig West.

“Australian businesses have a well deserved reputation for excellence, innovation, consistency and reliability, together with our high quality of life and multi-cultural population, underpins the attractiveness of Australian enterprises as a target for outbound investment or acquisition”.

The Australian economy is entering unchartered waters with an estimated 50,000 SME businesses coming onto the market for sale each year as Baby Boomers seek to give up work and sell their enterprises to fund retirement lifestyles.  Studies have confirmed over 30% of business owners are relying on the sale of their business as the primary source of retirement funding.

According to the MGI Australian Family & Private Business Survey (June 2013), the average age of family business owners is 58 years (with 37% in their 60s), and are delaying retirement hoping their enterprises will regain lost value following the GFC.

Craig West continued, “With supply exceeding demand in Australia for SME businesses, it makes sense for business owners to consider the dual benefits of exporting their goods and services overseas under FTA arrangements and promoting their businesses for sale or investment internationally”.

The Australian Federal Government currently has FTAs and related bilateral arrangements under negotiation with China, Japan, Indonesia, India, the Gulf Cooperation Council (consisting Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) and many others.

All national governments encourage companies to broaden their horizons and make strategic investments overseas, and to invest in industries that enhance and develop their nation’s own capabilities.  Most share a number of common sectors that include: Education, Healthcare, Technology, Building & Construction, Clean Energy, Tourism and Financial Services.  Australia has proven expertise and capabilities in all of these areas and this represents significant opportunities for companies who position themselves for this wave of new investment potential.

Many wealthy overseas entrepreneurs and high net worth individuals are becoming increasingly interested in migrating to Australia to satisfy a number of long-term retirement, succession and quality of life objectives for themselves and their families.  At the same time, the Australian Government is encouraging high net worth individuals to apply for permanent residence under the new Significant Investor Visa (SIV) program which is designed to attract investment into Government Bonds, Complying Managed Funds and Australian Private Companies.

With tens of thousands of overseas students being educated in Australian Universities annually, and wealthy overseas entrepreneurs looking to diversify their business interests and developing a succession plan for their children and future generations, Australia is well placed to attract private investment from those looking to adopt a “one foot in, one foot out” policy between their country of residence and Australia.

Many ASEAN based companies have achieved extraordinary growth in their domestic markets over the past decade but are reaching the point where future double-digit growth can only come from expanding overseas.  By investing in or acquiring international businesses, they are able to gain access to a global customer base, tap into new sources of product development, innovation and knowledge, and generate new revenue and profits from overseas.

The Australia in The Asia Century story is only just beginning and is a potential game-changer for Australian entrepreneurs and business leaders that can capitalize on these opportunities – especially those seeking a prospective buyer or investor for their SME business.

“However, irrespective of the source for a potential buyer, SMEs need to plan their business exit well in advance if they hope to extract the highest value.  The result of not having an exit plan or seeking a last minute buyer when an owner turns age 64, will only result in a potentially poor price being offered for the business – or more disastrously, none at all”, concluded Craig West.

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Succession Plus announce an intensive one day planning conference.

Instead of the start of a New Year being an opportunity to implement a carefully considered succession and exit strategy, far too many SME owners (especially the Baby Boomers) will do so without a plan in place as they fail to understand that successful exits begin years in advance in order to derive the best outcome said Craig West, Succession Plus Pty Ltd Founder and CEO, President of the Australian Chapter of Exit Planning Institute (EPI).

Commenting further, Craig West said “Generally speaking business owners are very good in their respective industry or market niche but not particularly proficient at management and certainly not skilled at maximising the value of their venture.  In particular, they struggle to comprehend and appreciate the issues associated with succession and transition and it can also be an emotionally charged subject for them with concerns on many levels that need to be addressed.”

“However, if the business is to be a legacy retained within the family or the funding source for a life in retirement, those issues must be addressed and the appropriate strategy implemented as soon as possible.”

Disturbed by this situation, and to assist business owners to start 2014 on the right foot, Succession Plus has developed a comprehensive program for an intensive one day strategic planning conference to be held in Sydney on February 7, 2014.

The Succession Plus Conference is a free event and attendees will obtain insights on tackling succession planning and how best to effectively commence and approach the process to best meet their individual circumstances.

Conference attendees will participate in a dynamic interactive day of presentations and discussions.  In addition, the program will encourage SME attendees to network with fellow business owners, share experiences and engage with the speakers during the breaks and the networking session at the end of the day.

The program will also address improved business performance and includes a keynote presentation from former Australian Rugby Union Captain and CEO of Centric Wealth, Phil Kearns who has  himself recently managed a successful $100M+ sale.

Leading SMSF expert Grant Abbott principal of NowInfinity and author of The SMSF Strategy Guide will provide an insight into the importance of incorporating robust retirement strategies into business succession and exit goals.

The post The anatomy of a successful business succession and exit appeared first on AdviserVoice.

SMEs need to improve their exit strategies.

The recently launched book Enjoy It-Business Succession & Exit Planning by author Craig West, Succession Plus Pty Ltd Founder and CEO, President of the Australian Chapter of Exit Planning Institute (EPI) has been very well received and acknowledged as an invaluable resource for SMEs seeking to maximise their exit or retirement potential.

Although extremely grateful for the very positive response the book has received as Craig West travels across Australia at book launch events in the main capital cities, the lack of exit and retirement preparedness by SMEs continues to be a major concern for the strategic business adviser and his team of consultants.

“The average age of Australian business owners is 58 (with 37% in their 60s), and are delaying retirement hoping their enterprises will regain lost value following the GFC.  To compound the dilemma of these business owners, due to their age and other factors, they are in the high risk group for heart disease, cancers and other age related conditions”, said Craig West.

According to the MGI Australian Family & Private Business Survey (June 2013), the average age of family business owners is 58 years.  Almost half of business owners surveyed see themselves working in the business beyond 65 years of age, with over 33% saying they will be relying solely on the sale of their business to fund their retirement.

Currently, 34% do not have any adequately funded retirement plan (up from 17% in 2006).

It is estimated that over the next decade the retirement of family business owners will see the transfer of approximately $1.6 trillion in wealth, which surely must make succession planning one of the most significant issues facing SME owners.

Yet incredibly, despite 75% of business owners surveyed admitting their businesses are not sale or succession ready; 52% do not intend doing anything about it over the next 12 months.

With estimates of 50,000 businesses for sale each year for the foreseeable future, the small business market may become flooded, which will put further pressure on business values.

Many SMEs will have no option but to simply close the door and walk away from their businesses.

In the current market the best chance of success is to be prepared and plan ahead.  If SMEs ’Begin with the end in mind’, they are much better prepared for making the right decisions along the way, following the steps towards their long term vision.

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