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.