“I’m going out on my own!” is not a business plan

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I’ve seen people start businesses for all types of reasons – some better than others. One of the most common is wanting to leave your job. There’s nothing wildly wrong with that, but you’ve sort of achieved your aim as soon as you quit. It’s not a goal you can keep building on.

Let’s say you’re a skilled employee. You’ve been working for other people, earning reasonable money, but you see how much the boss is making off your time. You don’t like some of the aspects of your job – maybe it’s the stress, or the hours, or the inability to solve problems in the way you’d like to sell them. You decide to go out on your own.

‘Going out on your own’ is not a good way to build a business. You should be beginning with the end in mind, not meandering along hoping to replace your income and spend more time with the kids. Those are perfectly reasonable goals, but they won’t build you a valuable asset.

What do you want your life to look like in the future?

  • Are you running a large, successful business?
  • Have you sold the business and retired early?
  • Is the business small, not growing larger, but increasingly profitable?
  • Or has it expanded to a second location?
  • How much is the business worth?

In other words, how will your business help your future self? For me, the ideal is building a business that will do one of two things. It will either:

  1. continue to operate without you and give you a passive income, or,
  2. become valuable enough to sell for a significant sum and give you a lump of money to reinvest and retire on.

Set out with those goals in mind and you’ll have a better chance of succeeding. We know that small businesses have high failure rates – a quarter are no longer operating within three years. The data on why this happens is mainly around the precipitating factor: the tax bill, the divorce, the economic slump. There’s no data, though, on how they started. I’d be very surprised if ‘I’m going out on my own!’ didn’t have a higher failure rate than ‘I’m going to build a source of passive income for my future’.

I have skilled, passionate clients who do a great job of making a living for themselves. But it’s frustrating that they are no better off owning a business than they would have been if they’d worked for an employer all their lives. If they’re satisfied, I can live with that. More often, though, there’s a sense of lost opportunity that I genuinely lose sleep over. Start as you mean to go on – if you want to ‘go out on your own’, set yourself a bigger goal and do what you can to achieve it.

Are you and your business dangerously co-dependent?


It’s simple: you can’t sell your business if it doesn’t run without you. There’s no value in a company that falls apart as soon as the seller leaves. If your business is over-reliant on you, you don’t have a saleable company. Some of the symptoms include:

  • You can’t go on holiday without business grinding to a halt.
  • You deal with all your clients directly.
  • You don’t trust anyone else to deal with issues.
  • It’s too much effort to train someone to do what you do.
  • You really believe nobody else can do what you do.
  • You’re not good at delegating anything and/or you tend to micromanage.

Setting aside the fact that it’s crazy to think you’re the best person to do everything, if you want a valuable business, it needs to run without you. That means having systems, so you’re not locked in a co-dependent relationship with your small business. Examples of systems are:

  • Writing down the process for handling potential leads.
  • Making a spreadsheet, with explanations, that works out your quotes.
  • Creating a diagram that explains your sales process.
  • Adopting CRM software and using it to track customer interactions.
  • Setting up invoice payment reminders in Xero.
  • Write down your rules for filing documents.
  • Have a set of actions to be followed to deal with customer complaints.

These kinds of systems can also make your business more efficient and profitable. Having the day-to-day details of client interactions out of your head and into a piece of software, for instance, frees up your headspace to think about driving new business or growing the company.

And not only do these systems add value to your business, they allow you to get someone else to take over aspects of the work, like the accounts. Often the first contractor for any small business is a part-time accounts person and if you can create systems for your accounts you can hand that work off to someone else. With your directions in place, you can have confidence that they’ll do things the way you like them done.

Ultimately, once you put all these minor systems together, you have an operations manual. When you want to sell your business, an operations manual shows a prospective buyer how to run your company – suddenly your small business looks like a smart buy. Even if you never sell the business, at least you might be able to finally take a holiday.


Do you really have a saleable business, or are you just self-employed?


Being your own boss can be fantastic, or it can be tough going – usually, it’s both. New Zealand is jam-packed with one-person businesses, like tradies, freelancers and contractors. Some work from home, some have an office, some operate from a vehicle. Running your own small business gives you flexibility, autonomy and freedom. But what it doesn’t necessarily give you is a saleable business.

Like every accounting firm in New Zealand, we have many clients who are self-employed. When those clients want to step back from their businesses, selling can be difficult or even impossible. As a self-employed person, you often build up your clientele by providing a superb, personalised service at a fantastic price. It’s not always possible to sell that – a saleable business needs to be something a new owner can make money from. If your margins are small, your customers deal only with you and your business has no major assets, where is the value for the new owner? There’s not much there.

If you’re a one-person operator, that can give you a strong income and a great lifestyle. If it’s working for you, don’t fix what’s not broken. But if you want to build a business that you can sell for a healthy profit, you may need to rethink your approach:

  • Are you undercharging? Even if you’re making good money because your overheads are low, that’s not a sustainable business proposition for a prospective buyer.
  • Is your business completely reliant on you? If you can’t take a holiday because your business would fall apart without you, it’s not going to survive a new owner.
  • Are you doing everything? If you do every single job in the business and you’re not making enough to employ other people to help you, that’s not going to be a valuable business.
  • Do you have systems in place that mean you can scale up the business? If your business is limited to its current market, it’s not an exciting prospect.

If you want to turn a one-person operation into a saleable business, I can help you make the kind of changes designed to achieve that goal. It’s not necessarily a simple process, it takes time and commitment. It requires your business to have a strong model and customer database to begin with. The upside, though, is that you could build a highly valuable asset that can create wealth for the long-term.

Should you hand your business over to the kids?

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Yes! And sometimes, no. The question of whether you should pass on your business to the next generation is a complex one. I’ve worked with many clients who hand over their businesses and it’s never simple although it can be enormously rewarding. If you like the idea of an inter-generational business, first ask yourself these questions:

1.     Does one of your children actually want to run your business?

You might run a brilliant, profitable business with potential for growth – you’ve done everything right. That doesn’t mean your kids share your passion or vision. If they want to follow their own path, trying to shoehorn them into your business won’t work. Even if you and I both know your son or daughter would be better off running your fantastic business than pursuing their dream of becoming a magician, there’s no point ruining your relationship by forcing the issue.

2.     Do you have a way to fairly split the business between your children?

Unless you have only one child, you need to ensure you’re apportioning the business fairly. You could split the shares up between your kids and if one will be running the business day-to-day, that child can be paid a salary. Alternatively, you can have the business valued and that can help one child buy out the others. If more than one child wants to take over the business, can they work together?

3.     Are they ready to take over?

Does your child have the skills to run your business? Do they understand how to keep the cash flowing and the customers happy? If they need more experience, or more time working in the business, make sure they have it. One major advantage of a family handover is that you can do a gradual transition of responsibility. If your child genuinely doesn’t have the skills to do the job, maybe you could hire a general manager until they get the experience they need. Do what you can to set them up well; it would be awful if they tried their best but the business failed – both you and your child could be extremely upset and it might damage your relationship.

 4.     Are you ready to let go?

There’s a fine balance between helping your child handle the business and not being able to let go. What will you do next? If you’re going to try to resist any changes and micromanage the business from home, you’d be best to hold onto the business a bit longer or sell it to someone else so you can let it go.

5.     Do you have a clear and organised succession plan?

By putting a plan in place, you can avoid a lot of the problems that crop up when you start transitioning ownership to your son or daughter. I can help you create a schedule for a gradual handover, helping you have a clear timeline so you can move onto your next adventure.

Sale season: when should you sell your business?

A great business will always sell, but if you want the best price there are definitely better – and worse – times of year to put your company on the market.

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Before the season starts

Most businesses are seasonal in some way, from the obvious (like horticulture) to the less obvious (like a marketing business), there are busy times and flat periods. The best time to sell is during a flat period when a busy period is impending.

If you’re in retail, you might sell in September, so your new buyer can anticipate the Christmas rush. If you’re a ski hire company, you might sell in May as the snow season approaches. Even a non-seasonal business like plumbing can have quiet periods in winter and around holidays.

When you’ve recently received fresh accounts

I’ve overseen the sale of hundreds of Kiwi companies and buyers always want to see up-to-date information and three years history – usually all in signed-off accounts. This means that right after you get your fresh set of accounts for 2018 is a good time to put your business on the market.

At a time when people are paying attention

Don’t put your business on the market at these times:

  • December or early January – everyone’s away. I would recommend the second week of February as the earliest point in the year to put it on the market, and the start of November as the latest point.
  • Election time – everyone’s distracted. Decisions aren’t made, people worry about changes, and nothing happens. Everything’s on hold until the new government is decided.
  • During a major sporting event – again, everyone’s distracted. Rugby World Cups, America’s Cups, Olympics; wait until the palaver has subsided before making your move.

Start preparing at least six months earlier

You can plan to sell at the perfect time, but it won’t do you any good if you’re not ready to go. It takes six to 12 months to get a business ready to sell. There’s a lot involved in making the company run as smoothly as possible and in the best financial shape of its life. You’ll also need to work with a sales specialist accountant like me, your business broker and potentially your team members to create a list of possible buyers.

That means if you plan to sell your business this year or next, you need to be in the process of getting all your ducks in a row right now. Need some guidance? Give me a call.

Kiwis are job-hoppers, but you can help them stay

New Zealand is a “nation of job-hoppers” according to Statistics NZ, which says half of earners have been in their jobs for less than 18 months. This has been a traditional aspect of the New Zealand job market for decades, so I take the idea of a “great millennial job-hop” with a grain of salt. I don’t know why we love to switch jobs; it could be tied to our love of travel or the fact that it’s relatively easy to find a new job. Whatever the reason, it can be a headache for employers. It’s hard to build a great sale-ready business when you’re having to replace your top people every year. It’s expensive and disruptive.


How can you help your best people stay? Obviously you need to treat them well, pay them properly and make sure their working environment is a pleasant place to be – easier said than done, but not the topic of this blog. What we’ve been working on recently with clients are long-term incentive plans for your top staff members. Each plan is tailored to the staff member’s experience, value and salary. There are bonuses, but they don’t only reward good work – they also reward years spent in the business. Team members build up incentives as they remain in your business. If the business sells, the built-up money is paid out in full – and if the business sells over a certain figure, they can earn even more. This helps make your team members strive towards building a strong and saleable business: there’s a big bonus in it for them if it succeeds.

We’ve been implementing this for two years for one client and one year for another client. Obviously it’s early days, but let me say that job retention for the people with long-term incentive plans is 100% so far. Obviously it requires an investment of time and money, but the true cost of replacing a good manager in your business is much higher than $10,000 or even $20,000. The longer your manager stays, the more valuable the work that person is doing. And those bonuses are a powerful way to show that you value that expertise and a fantastic incentive for your people to stop job-hopping.

Planning to sell in five years? Now is the time to put this type of long-term plan in place. If you want to know how to keep your top people, give me a call and I can help you put this in place.


Ready to sell your business?

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Considering selling your business? Don’t take it lightly. In my experience it can take a full 18 months of preparation and negotiations to achieve a satisfactory sale of your business. Seems like a long time? It might, but consider what needs to be done:

·       analysing the value of the business

·       improving the value if you can

·       preparing the paperwork

·       finding a buyer

·       negotiating a sale…

and doing it all while continuing to run a successful operation.

Xero has recently released a succession planning guide which certainly contains some helpful general information. It says the biggest hurdles with selling your business are exit strategies, getting it sale ready and negotiating the sale itself. Those are definitely all areas where problems can easily arise. But right now, I think the bigger issue is actually finding a buyer. Business brokers tell me they’re struggling to find people who want to buy businesses – I’m hearing that “it’s tough going, the buyers just aren’t out there”.

The Xero report asks the questions “Why are fewer young people entering business? Our ageing business ownership reflects a lack of young entrants. What’s holding them back? Is the small business sector at risk of shrinking?” I think those are great questions, and there are lots of factors at play.

One factor is my generation of business owners. Yes, we’re ageing. But anyone with a great business is able to pick and choose their hours, while still making fantastic profits. It’s the same reason baby boomer couples are still in their five-bedroom family homes. We’ve assessed the alternatives and they just don’t add up.

When it comes to young people, I wonder if they’re focused on trying to get onto the property market? I’m not sure, but buying a house is so much harder than it used to be. Perhaps as Kiwis are now buying houses later in life and having kids later in life, they’re also delaying business ownership as part of the same overall pattern. This could be a missed opportunity, as I’ve discussed before, because a business could be a fast-track to buying a house if you do it right. And of course when there are few buyers around, it’s potentially a good time to buy at a competitive price.

Excellent businesses will always sell, and sell fast. But if your business isn’t a cash cow, you may need to think creatively about how you can find a buyer, what it’s really worth, and whether you can improve its value before you put it on the market. Succession planning incorporates all these steps, but it could take a year-and-a-half to get all your ducks in a row.  

The cashflow mistakes that cost kiwi business owners money


Stronger cashflow makes your business more valuable. It also has the major side benefit of helping you pay your accounts on time, including your taxes. That means no more frantic scrambling for cash when people want to be paid, because your cash is already in. But I see so many small business owners in New Zealand whose cashflow is preventing their business from growing and realising its full value.

Let me tell you the major cashflow mistakes I see small business owners making:

Not sending out invoices on time. What’s this about? Why do a significant number of my clients invoice late? Invoicing can seem like an onerous chore, but it shouldn’t be. Maybe get onto Xero and make it easier, or take time to set up systems that process your quotes directly into invoices when the job is done.

Invoicing 100% on completion. This is a killer. You take on all the costs, spend months doing the job and then you need to wait for sign-off before you can send the invoice. Then you potentially wait another few months to get paid. Chunk up your invoices so you get some money up front and make sure only 10% or less relies on sign-off. Just enough to make you chase sign-off, but hopefully not enough to mess up your cashflow.

Chasing outstanding accounts while asking for work. When you’re a small business, you can find yourself simultaneously chasing an overdue account from the same person you’re working with on a new job. You can end up asking for work from that person, while also chasing them for money. Not great. Early in the relationship, try to make contact with the accounts department so you can hassle someone else. Alternatively, pay someone else to chase the account for you.

Pricing too low. You would be astounded how many Kiwi business owners are under-pricing their services or goods, usually because they don’t feel they can increase their prices. You might think your market won’t accept higher prices, but you should try to find a way to test it. Even a 5% nudge in your prices will increase your cashflow and improve your business’s value.

Continuing to deal with customers who are habitually poor payers. Don’t do it. Customers who don’t pay the bills cost you time, money and stress. Let them go and focus your energy on finding better customers.

Bigger companies typically have systems in place to prevent all these problems, but small business owners can easily get caught up in one or even all five of these mistakes. Sort your cashflow out and you’ll be one step closer to building a sale-ready business.

5 ways to boost the value of your business


Whether you want to sell or not, it’s always helpful to boost your business – making it more saleable is just shorthand for making it better, more profitable and more sustainable. Here are five key ways you can consider giving your company a kickstart this spring:

1.     Improve your cashflow. This may be as simple as changing your invoice patterns or payment terms. I’ve had clients with service businesses who would get into a hole come tax time because they never got around to doing their invoices until a month after the job was complete. And who says the job needs to be complete, anyway? Upfront and progress invoicing are becoming increasingly popular and can do incredible things for your cashflow.

2.     Expand your customer base. It’s all too common to meet Kiwi small business owners whose entire revenue depends on five – or sometimes one! – customer. It’s difficult to sell a business that is essentially a contract supplier to a single buyer. As a rule of thumb, no single client or customer should make up more than 5% of your total sales.

3.     Work toward your business plan – or write one. It doesn’t need to be a thesis, but a well thought out business plan helps keep your company on track and helps you maintain your focus. As you progress along or close to your projected targets, the business plan helps show a prospective buyer that the business can achieve its goals. Even if you never sell, a business plan can be a great tool for growing your company, so talk to your accountant and salespeople and get it underway.

4.     Put your prices up. I know accountants have a reputation for always saying this, but it’s true. We modest Kiwi workers tend to undervalue ourselves and our products. If you’re busy, you can put your prices up. Provided you get the numbers right, if you lose some customers, you’ll probably still break even. And when you gain new ones you’ll be well ahead.

5.     Treat your A customers well. You know the customers I’m talking about. They’re easy to deal with, always pay on time and rarely make a fuss. Treat them like gold. These people will be your best source of recommendations, and usually recommended clients are A or B clients too. That’s because they’re pre-screened by your existing happy customer so they know what you do and they know how much they’re going to have to pay for it.

Okay, that’s it. What are you waiting for? Get on with it.

Brace yourself for the boomer business sell-down

Are we are on the verge of a massive business transition in New Zealand as baby boomers sell their companies to help fund their retirements? A recent ASB customer survey found that one in four business owners is planning to transition out of their business in the next five years. If even close to a quarter of New Zealand businesses are going to change hands between now and 2023, what will this mean for the small business marketplace?

  1. First, it means opportunity and choice for buyers. There won’t be just one small legal practice or local building company for sale, there will probably be several. Buyers will have the chance to compare and contrast businesses, as well as having more room to haggle. Traditional industry multipliers may fall as supply increases.
  2. Second, will banks need to rethink their lending? Currently banks love real estate, but they’re hamstrung in many ways by lending restrictions. Businesses? The banks are certainly interested, but it’s more like the old ‘cap in hand, please give me a loan, sir’ days of yore. I would like to see more lending to business because I believe it genuinely creates value in our economy, unlike increasing house prices.
  3. Third, business owners will need to be ready for picky buyers who want as much information as they can, who may need help with finance, and who may also need their hands held as they take over. In a competitive environment, you’ll need to make your business stand out from the crowd and spell out what makes it worth buying.

If you are one of the tens of thousands of small business owners who is planning to retire in the next five years, don’t be overconfident. When you do your retirement planning, it would be a mistake to have an inflated view of your company’s value and its saleability. Get your company valued by someone who knows what they’re doing – and I mean really valued, not just somebody saying ‘multiply your annual sales by three’ or some other vague number. Then you need to have a plan in place to step back from your business in order to realise that cash so you can spend it travelling through Asia or collecting art or simply paying for your everyday living expenses for the next 30-odd years.

Don’t leave your succession planning to take care of itself, because it most certainly will not.

What are business buyers looking for?

Business buyers in every industry want to look at your financials so they can clearly see:

  • How your business is making money.
  • What your business owns.
  • What you’re spending money on.
  • Exactly what you’re offering for sale.

Buyers want to know those things so they can work out the answers to these questions:

  • What is this business worth?
  • Will it keep making money after I buy it?
  • How much money is it likely to make in the future?
  • Should I buy it?

Okay, it’s a bit more complicated than that, but in essence those are the basics. But you’d be amazed at how many business owners don’t realise how much of a difference it can make when you present these financials properly.

Take your personal financial situation as an example. When you apply for a mortgage, your broker will tell you ways to make your position look stronger. You’d clear your hire purchase debt before applying and you would definitely make sure your recent pay rise was factored into the application. You’d try to demonstrate that you weren’t spending too much. You show the bank you’re a great bet to repay your loan every month. Any mortgage advisor will tell you that how you present your case can definitely make the difference between being approved and being declined for that loan.

It’s a similar approach to showing your business in a positive light. It’s not about lying or covering anything up, it’s just about presenting your business in a way that highlights its strengths and shows that it’s a great bet. And I’m here to tell you that the way I can present your business can make the difference between a buyer saying yes and a buyer saying no. It can also help you achieve a higher sale price for your business by providing up-to-date figures that show its full earning potential and showing that you’re spending sensibly and selling a really valuable asset.

One of the most important factors is making the financials clear and easy-to-understand, so they answer all the questions the buyer and their advisers have. When a business’s financials are put together in an impenetrable knot of jargon and confusing transactions, it’s enough to make any buyer throw up their hands and say, “Way too hard. Next contender, please.” Transparent financials make it easy for a buyer to see exactly what’s happening and allows them to concentrate on the story rather than spending all their time deciphering your crazy figures.

If you want the right buyer at the right price for your business, make sure you have the right set of financial data available to your potential buyer.

Build a business, buy a house

Young Aucklanders want to buy houses, and that’s a great goal for a rent-free retirement. New Zealanders in general view houses as a safe, reliable investment in their own future. But few young Kiwis buy businesses. They’re seen as risky, unreliable and potentially stressful – and although that’s a worst case scenario it can certainly happen.

House = good, safe investment. Business = not so good, risky investment.

However, I really think that we’re doing young Aucklanders a disservice by promoting this simplistic view of both the housing market and running a business.

A business is more risky than a house. But it also has the potential to make a lot more money. It can provide you with a healthy income, assets, job security, and the possibility of building a valuable saleable company. There’s not necessarily a cap on a business’s profits. And if you want to build up a deposit and buy a house, owning a business could be a great way to make that happen.

I have several millennial clients who are café owners or electricians, for example, and they have used their business income to help them buy a home. As your business grows and starts to make more money, provided you can prevent your style of living from escalating concomitantly, you can put aside your additional earnings to help grow your 20% deposit. Saving your extra income when you’re an employee can be more difficult. Once you’ve been building your company for several years and you can prove a reliable cashflow, a bank will probably feel reasonably comfortable that you can service a mortgage.

Banks simply don’t believe in business the way they believe in real estate. The ease of borrowing for houses is one of the contributing factors to high levels of housing unaffordability. Banks won’t always lend to a millennial to buy a thriving business, even if the bank would lend that person hundreds of thousands of dollars to buy even the most decrepit property. There are ways to work around this, which I’ve used with my clients on occasion. One option is a combination of bank and vendor financing, which can help an owner transfer ownership of their business to a fresh young face (often a very talented staff member). I’ve helped facilitate this in the past and it can be an excellent alternative to full bank funding.

If you can get past the hurdle of financing your way into the business, the business may be able to get you past the hurdle of financing your way onto the housing ladder.

Geoff in the latest issue of NZ Retail magazine

Last month I spoke to NZ Retail magazine about succession planning for their cover story: 'Don't leave it too long'. It's a great feature by Jai Breitnauer with insights into selling your business before it passes its sell-by date, and making your business sale-ready. 

You can read my full comments below:

Geoff Hamilton from SME Financial in Auckland calls this having a ‘sale-ready’ business, and says one of the most common factors that devalues a business is too much dependency on the owner.

“If the owner is so important to the business they’re limited to being able to sell to someone like themselves. They’re not going to be able to sell to an investor who wants to buy a business that will operate itself and produce a passive income.” Hamilton says a good business will have systems and processes in place so the business can be run by the staff with the owner absent. This will ultimately increase the value of the business to a prospective buyer, or make it easier to hand the business on to children who don’t necessarily have the right skills.

Succession planning early can also assist business structure and growth - something Hamilton believes is hugely overlooked.

“People get so involved in the everyday, every decision, micro managing, they haven’t put their head above ground to see how they could organise things so they don’t have to be there all the time,” says Hamilton. “I ask business owners, if they freed up 20 hours a week, how much more new business could they generate? Usually SME owners say, ‘We could double the turnover!’ so why don’t they get someone in to give them that 20 hours? Because it means they have to go without things.”

Hamilton notes that businesses with good cashflow often invest in the trappings of success, like a new car or the latest mobile phone, when they should really be investing in training and developing staff, and on infrastructure.

You wouldn't sell your house like that, would you?

Selling a business has a lot in common with selling a house or a car. When you want to sell your house, you need to get it in order. You don’t just put up the For Sale sign without tidying up a bit. You don’t do that because the buyer will turn up and start adding up the discounts: $15,000 to fix the hole in the driveway, $6,000 for the new carpet, $5,000 to replace the fences.

That’s exactly what happens when you start negotiating the price for a business that isn’t sale-ready. The price starts out high, then the buyer begins to see all the places he or she is going to need to spend money. Is it working capital that will need to be cashflowed? Is it new staff members who will need to be hired and trained? Is it plant or other equipment that needs updating?

When it comes to finding a price for your business, a buyer will tend to start high and negotiate you down. There are cases where a buyer puts in an offer and ends up paying a lot more, but it’s rare for small local operations. Like real estate, the first offer is often the best. Ideally you’ll have a strong bargaining position in order to prevent yourself from being pushed too low. A strong bargaining position means eliminating as many of those cash-traps as possible.

Now, at the risk of sounding exceedingly boring, the best way to achieve this is to have your business ready to sell. Maintenance is usually cheaper and more efficient than waiting until a problem starts having a big impact on your company’s value. Just like fixing that hole in the driveway would have been cheaper when it was just a crack, it’s far better to maintain your plant and equipment, keep your staff happy and sort out your cashflow issues right now (more on that in a later blog).

Even if you don’t intend to sell right now, your business should be reasonably ready for a buyer to inspect. If it isn’t, think why not. Anything that’s liable to be a problem for a potential buyer will also cause issues for you as the operator of your business. Think about how you’re allocating your time and your money, and do what you can to get your business sale ready this year.

Working On Your Business, Not Just In Your Business

The number one reason the average Kiwi business isn’t ready to sell? Because its owners are so busy working in the business that they’re spending almost no time working on it. Just last week some new clients admitted that they had worked with a business strategist but the poor strategist gave up after six months because they kept cancelling the meetings.

Why? Well, it wasn’t because they had the strategy all figured out and running smoothly, that’s for sure. They cancelled the meeting because they were busy dealing with customers and effectively filling orders. I guess it’s better than ignoring customers and failing to fill orders, but in general it’s pretty short-term thinking. It’s the equivalent of drinking a coffee every time you feel hungry and never stopping to cook dinner.

There needs to be a way for you to keep your customers happy, fill orders, and still have some time to work on your business. In some ways, it seems that the harder it is for you to find time to strategise, the more essential it is for your company.

How does strategic planning and structuring get overlooked when it’s so important? I believe there are three main reasons:

  1. It’s not urgent. There are always more urgent jobs that need to be done. Strategic planning keeps being sifted to the bottom of your to-do list by more pressing matters.
  2. It’s not easy. Dealing with a routine, but urgent, problem usually requires you only to use your day-to-day skills at your normal level of effort. Strategic planning is full of difficult questions that aren’t easy to answer and the solutions can be both complex and expensive in the short term, even if they’re a no-brainer in the long term.
  3. It’s not a quick win. Most jobs on your to-do list can be crossed off in a very satisfying way once completed. Strategic planning and implementation, on the other hand, is never finished and can take years to pay off. It doesn’t give you any instant gratification.

Strategic planning falls into the same category as other regular activities that aren’t urgent, easy or quick – like healthy eating, saving for retirement and exercising. You’ll notice that these are the types of long-term strategies that pay dividends in the future or gradually over time. They’re not necessarily fun, but they’re good for us. They keep us healthy, and secure, in the future.

That’s what strategic planning does for your business: keeps it healthy and secure into the future. That’s what makes it valuable and saleable. So don’t let it get sifted down your to-do list every month – make the time and you’ll thank yourself.

Are you building a business or simply self-employed?

Are you building a successful business or merely self-employed? There’s a world of difference between the two: one is a long-term money-making freedom-creating asset. The other is essentially still a job. It might be a great job, and it might be both profitable and flexible – it might be everything you want – but it’s not a readily saleable business.

New Zealand is full of entrepreneurs, but thousands own businesses that couldn’t run without them for more than a few days. If you are one of those Kiwi business owners, unfortunately your company isn’t worth as much as you might think. You could be growing a somewhat valuable client database, or even a slightly more valuable portfolio of assets – that could be enough. But you’re not growing a desirable, saleable business.

I’ve spent years – decades, in fact – creating a business that still runs when I’m not there. This has an array of benefits that go beyond saleability. One of the biggest bonuses? I can go on holiday with my wife without having to telecommute from the beach. Surprisingly few small business owners in New Zealand actually manage to do this. Feel like you can’t take a holiday from your business without causing chaos? You may fall into this category.

I don’t like being the bearer of bad news, but it’s best you find out now, so you have time to remedy this problem if you’d like to (not everyone wants to, and that’s fine too). Think about what you would want to see if you were buying a business. It’s very much like what you want to see if you’re planning on buying a parcel of shares. You’re looking for good management, strong and reliable profits, and a sustainable underlying business model. You’re not looking for one person who’s really good at what they do.

So what can you do to make your company run independently? There’s a lot of strategic thinking involved, and often some short-term pain. You need to have systems in place to help your team follow the correct processes without requiring your input. You need to show your customers the processes work without you there. If you’re in a service industry, you may need to specialise in one specific area and start creating packages to sell. Manage your cashflow so customers pay up front and your forecasting becomes predictable. (For a great case study, read Built to Sell, despite the fact that the author paints the accountant in rather a bad light!)

Making the right decisions now puts your company on track to be more valuable, more saleable, and a serious asset in your portfolio. If that’s what you’re trying to achieve, don’t keep on working away in a job where you just happen to be your own boss.

Need some help? Give me a call.


BUSINESS SALES: Helping the bank say 'Yes'

When you’re selling your business, your buyer will often need finance. If your buyer is in their 30s or 40s, it’s quite likely that they already have a massive mortgage. Banks like owner-occupied and will lend you a much larger proportion of a house’s value than you can get on almost every other asset – plus they’ll charge you lower interest rates. New Zealanders in their most productive years are steered firmly towards buying their own houses, which is probably a great idea in principle, but leaves them with little to invest in even a highly profitable business.

If your heavily-mortgaged buyer then wants to buy your business, the bank’s default answer will be ‘no’. That’s because saying no requires no risk, almost no paperwork, and very little effort. This is a shame, because there are private businesses available for sale that are superbly profitable and would deliver higher returns than any rental, with total returns even higher than the equity growth in the average homes.

With money being pumped into real estate as a priority, it makes it difficult for younger New Zealanders to invest in business. This problem is here to stay and has the potential to hamper business growth – which is, after all, what really drives economic growth and prosperity for everyone.

I’ve recently been helping a client find ways to finance a staff member who wishes to purchase the business. By working with the bank, the buyer and the vendor, together we’ve pulled together a way to make it happen – matching a happy vendor with a highly skilled staff member who will do a fantastic job.

This has been a challenge, but I believe it’s worth putting in the time and effort to show the bank that it will work. The default answer from the bank will always be ‘no’ if you don’t take the time to really build your case. It’s the easiest, least risky option for the lender. You need to make it easy for the bank to see the ‘yes’. That means lots of number crunching, lots of forecasting and a compelling story. The right business, the right deal and the right lender can be the ultimate win-win-win story – more jobs, more money and the bank makes a profit. You can help the bank see the ‘yes’, but don’t expect it to be quick or easy.

What’s your small business worth?

I get this question often, but unfortunately there’s no simple answer. Let me break down some of the aspects of your business you need to think about when considering its value:

1. Does your business have fantastic potential?

Trick question: buyers are far more interested in a track record of strong profits, or solid high-value contracts, than in your sales pitch about ‘Uber for landscape gardening’ (and no, I don’t know how that would work). Obviously your business will be more valuable if buyers can see a strong path towards growth, but pie-in-the-sky businesses are available very cheaply on TradeMe – ideas are much easier than execution when it comes to building a valuable business.

2. How much profit does your business generate each year?

The company’s revenue and assets are the best guide to its value. If your business generated a profit of $50,000 last year and you can show that’s likely to continue for at least another two years, you could value the business at $100,000. You’ll also need to add in the value of any assets, like machinery or vehicles. But there are several caveats to this rough estimate.

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3. Are you the absolute lynchpin of your business?

This is common in small New Zealand businesses – the owner has built up superb loyalty from his or her customers but this loyalty won’t necessarily extend to the new owner. The result is a business where the only value is in the assets. Similarly, quite a few small business owners are not being paid a market salary by their own companies; they just draw out any profits as cashflow allows. This type of business isn’t likely to be valuable to a new owner unless that cashflow is demonstrably excellent and reliable.

4. Is your business in an industry that’s easy to value?

Companies in the professional services sphere are easier to value: law and accountancy firms, property management companies and other similar companies have a book of fees or a rent roll or some other easily measured way of seeing projected cashflow. Other businesses are much harder to put a price on – think online businesses, new businesses, consultancy services and so on. They’re worth exactly what someone is prepared to pay for them. Finding that someone can be the tricky part.

5. How many buyers are interested in your business?

Unfortunately, there are more businesses for sale than buyers. Many New Zealanders love the idea of starting their own businesses and would rather take a chance on a new venture than spend money on an existing one (even when this may be both costlier and riskier in the long term).

Whatever type of business you have, you need to be able to show it to a prospective buyer in a positive light to get the maximum price. This means having all your accounts in order, demonstrating your revenue and track record, and showing where the value lies. Your accountant should be able to help you with all these documents – or give me a call and I’ll help you put together a full presentation pack to help you maximise the value of your business. 

How can you step back from your business? Part 1: family

When you’ve been running your own business for many years, at some point you’ll want to step back. You may just need a break from the daily grind and frustrations of the workplace. Perhaps you’re looking for a new challenge. It could be time to travel the world and enjoy the spoils of your labour. Or possibly a health issue needs your attention, whether its yours or someone else’s.

There are so many reasons you might want to step back from your company – and there are plenty of options, too. The obvious exit strategy is to sell the business through a business broker or similar. But that’s far from your only choice. You might like to consider other possibilities. This is a trio of ideas for stepping back from your business, starting with:

#1: Passing your business to the next generation

When you sell your business outright to a fresh face, it’s a relatively clean break. In contrast, passing on your business to your children or other relatives is more of a gradual process. It requires tact, generosity and negotiation on all sides.

I’ve helped business owners work through this transition before – it’s never without its ups and downs. That includes taking into account the company’s financial position and the finances of all the people involved. Younger generations may be highly indebted and take time to be able to shoulder all the financial responsibilities of the company. Hasty decisions can be costly.

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But it’s not merely financial. As the owner, it’s easy to insist on doing everything the way that works for you. However, at some point you’ll need to let the new owner make his or her own mistakes and discover new innovations. You can’t be forever offering unsolicited advice at every family dinner – nor should the new business owner be constantly calling you for help when you’re out sailing.

Having a plan to follow, and taking the time to do thorough training, helps the handover go as smoothly as it can. Get it right, and you can build a legacy company with considerable heritage and experience. You can go sailing and your kids can continue building the business you started.

However you want to transition your business, it starts with planning and good advice. Give me a call if you want to talk.


How can you step back from your business? Part 2: staff

There are so many reasons you might want to step back from your company – and there are plenty of options, too. The obvious exit strategy is to sell the business through a business broker or similar. But that’s far from your only choice. You might like to consider other possibilities.

This is the second in my series of options for stepping back from your business, following on from #1: Passing your business to the next generationwhich you can also find in my succession planning blog.

#2: Transitioning your business to a staff member

 Do you have a senior member of staff who is keen to take over your business? This can be a fantastic way to sell to someone who really understands the industry, the customers and your aims for the growth of the business. Done right, it can be a relatively straightforward sale with a smooth transition. It can also ease you out of the business gradually.

When I’ve worked on these transitions in the past, I’ve helped put together all the paperwork for an independent valuation of the business. The employee will rarely have the money to match the price immediately, but usually we’re able to work on a profit payout system over several months or years, buying the business on a kind of payment plan.

You may not get absolutely top dollar when you sell to a staff member (or to the next generation, for that matter) but you’re less likely to see the business quickly run into the ground or sold off. The brand you built may remain strong, or grow even stronger – and you may still retain an interest in the company if that works for both parties.

 However you want to transition your business, it starts with planning and good advice. Give me a call if you want to talk.