Business Mentor

I feel like I'm drowning as well. It is all just getting so big. Another OHS inspection tomorrow and I'm ******** bricks - I have to present our brand new OHSMS that I have worked so hard on and I have no idea if the feedback will be positive.

I think it is because I feel like I'm drowning that I wonder if it is even something that can be sold. Business broker seems to think so - profit margin is decent (circa $100K net pa). Unfortunately he is in Bali for 2 weeks so have to wait till he gets back to list it! @geoffw how did you find the whole selling thing? Was it easier because it was a franchise do you think?

 

How critical are you (and your partner?) in the running and success of the business? If you are critical, then you may be disappointed with the sale price of the business.

Warning:- what follows is a generalisation. Typically the value of a business is based on the last three year's financial and accurate forecast of next year's financials multiplied by a capitalisation factor. For small business, the factor is typically between 1 and 4.

The riskier the business, the smaller the capitalisation factor and the smaller the sale price. One risk most perspective buyers will look at is involvement of the current owners in the business. If you are in the business up to your eye balls (drowning), then the risk is high for the new owners and they won't want to pay much.

You have many options. One option would be to put a plan in place for you to exact yourself out of the running of the business (ala Michael Gerber in The E-Myth or The E-Myth Revisited). As @Ace in the Hole stated, such changes typically take a few years to implement but, imagine if in a few years, you had a manager running the business, making $1M profit, using this business as your cash cow, etc. Such changes require careful business planning. You have a business that you are not working in and is less risky for any new owner. The business has now become very saleable. Now you have more choices - you could keep it as a cash cow or sell it for possibly $3M to $4M (maybe CGT free).

I am not an accountant (Warning!!!) but I understand that if you own your business for 15 years (you are already more than halfway there), 55+ years old (don't know your age and I am not asking for it), etc, you can sell your business CGT free if you roll the sale proceeds over into a super fund. Imagine rolling $3M to $4M into your smsf.

I have a friend who owned and worked in his business. He was a techie and he hated running the business (he enjoyed doing the technical stuff). He apponted a General Manager to run the business for him. This lady grew the business from a turnover of $7M to $15M in a few years. In reality, my friend was holding back the business and the best place for him was not running the business.

I trust I haven't confused you @JessicaP. If I have, I am happy to clarify.

 

Thanks so much @kierank for such an informative post. Sometimes I feel like brokers can be a little "salesman" like and not give an entirely accurate picture.

We have only just turned 31 and 33 so no option of tax free.

We would be selling over $150K worth of assets (excavators, trucks, utes etc). If we could sell the business for around $350K we would be over the moon - gives us that little bit more leverage to be able to make a good wage off property. From what the broker said it is doable.

Both of us are crucial to the business at the moment and I feel like you are right when you say we have two options - sell now at a lower price or hang on, get a business mentor to teach us how to step back and work really hard at finding better staff. Which would take years, but the pay off would be huge like you said.

We are in negotiations at the moment for the railway sleeper contract - if we land this it is huge and would probably be worth hanging on for. If not......

 

@geoffw, I should have googled it before I posted. I know there are a number of small business exemptions. I have utilised some of them.

My advice to anyone who wants to use them is to hire a professional (typically an accountant specialising in this area) to make sure you understand what boxes you must tick, then if necessary, make the changes to your business to tick the boxes and then sell. It becomes a bit messy if you get it wrong!!!