Planning an exit strategy

Exit strategy

Your strategy should:

• * ensure the business continues to operate soundly into the future

• * protect the interests of employees

• * protect the quality of services to clients

• * increase the monetary value of the business for you as the owner

Having a succession management strategy allows you to develop and review the direction the business is taking while considering a range of market factors. It also allows you to take the appropriate time to invest the necessary resources and to undertake the required ‘housekeeping’ so that your business is investment-ready or sale-ready at any time.

Future Shock

According to a survey—KPMG, Family Business Australia and Deakin University of Family Business Needs 2006–more than 70 percent of Australian businesses are family- owned and are typically small to medium size.

This sector, like others populated by the baby boomers, is about to experience an age-driven shock. The age profile of SME owners in Australia today consists of those aged 50 years or older (33 percent and growing at 3.7 percent per annum), those aged between 30 to 50 years (58 percent), and those aged younger than 30 (9.4 percent).

The number of business owners who intend to sell their business on the open market as an exit strategy has more than doubled from 16 percent in 2004-05 to 38 percent in 2005-06. A quarter of family business owners intend to retire within the next five years.

There is a disproportionate number of people between 45 and 65 years old (24 percent of the Australian population) when compared with the number of people in the potential buyers category 35 to 45 years old (15 percent of the population).

This demographic mismatch means that only truly profitable or professional family businesses will attract premium pricing, with the prospect that the ‘also-rans’ will be difficult to sell.

* Bill Hovey is CEO of the linchpin group Australia "linchpingroupaustralia.com" and practice executive director of linchpin succession management "successionmanagement.com.au"