You’ve put in the hours, you’ve watched your business grow and thrive. Now you’re ready to reap the well-earned rewards. But is your business ready?
‘How much is my business worth?’ This is the question on most business owners’ minds when the time comes to sell up and retire. When you’ve sacrificed so much and put so many years of work and effort into building your business, it’s easy to imagine that your business is worth a great deal more than what the professional valuation says. ‘Is that all my effort was worth?’ you think.
A more realistic response would be ‘How much do I need my business to be worth?’ To find the answer to this, you need to ask yourself two key questions:
- When do I want to retire?
- What retirement lifestyle do I want? For example, do you want to live a quiet life by the beach? Or is travelling the world what you’ve always wanted to do?
Analyse your business
The first step to increasing the value of your business is to identify its strengths, weaknesses, opportunities and threats. Consider asking your key operational staff to do this exercise as well – you might be surprised at how the answers differ. Also consider the following:
- Does the business perform to industry benchmarks?
- How much old and outdated stock is on hand?
- How are exchange rates affecting sales?
- Are there any debtors outside of payment terms?
- Does most income come from a few customers?
- Are the business premises key to business success? If so, is the tenure secure?
Work out your priorities
Once you understand the business at a strategic as well as an operational level you need to set priorities. Is there a significant weakness that needs to be addressed first?
Outline how you will minimise the risks you’ve identified, including what you plan to change, how you will change it and what effect you expect the change to have on the business.
Work with your staff and accountant to identify structured procedures to ensure staff require minimal supervision. Keep track of your success with regular reviews and business revaluations.
BE REALISTIC AND FLEXIBLE
It’s always important to keep your retirement goals realistic based on the minimum you can live on, without factoring in your dream. If you’re not able to implement the business changes within your original timeframe, you may need to review your retirement timeline, change the strategies for your business or reconsider your retirement lifestyle.
By taking some crucial steps now, you can help ensure your business reaches its full potential before you sell. With a planned approach to increase the value of your business, come retirement, you will reap the rewards.
———
About the Author:
Kim Lambert is a Client Manager with Bentleys Newcastle.
