A recent study highlighted a number of major problems facing family owned businesses. It found that while 46% of family business owners are actively planning for the future sale of their business, many will not be able to achieve this. It also found that 45% of business owners plan on working past 65, some by choice and others from necessity.
According to the MGI, Melbourne University & RMIT Family & Private Business Survey 2010 that surveyed 5,000 businesses across Australia, the average age of business owners is 55. This is clearly going to lead to many businesses coming on the market, as this survey predicts. The trouble with this is that it will create a buyers market and make it difficult for business owners to get the price they would like. Another problem the survey identified was that 44% of businesses were not sale ready. This will make it even more difficult to gain the desired sale price.
It is important to have your business sale ready, even if you are not actively trying to sell it. 25% of the businesses surveyed said they had been approached by someone wanting to buy their business. If your business is not sale ready it is unlikely that you will be able to maximise the price you could get for it. Do you know what your business is worth? Do you have your business well systematised? Do you have key
staff in place that can run the business when you are not there? Do you have a succession plan? These are just a few of the things you need to have in place to be sale ready.
The biggest challenge, the survey found, facing family businesses was communication between family members working in the business (40%). These findings certainly resonate with my experience. Over the past year I have been conducting a number of strategic planning sessions for businesses. We involve the
family members and senior staff in the process. One of the recurring responses we get is “one of the best things about this process is that we now talk about things we have never been able to talk about before”. The trap we as small business owners often fall into is that we get so busy in the business that we don’t make time to talk to each other apart from the necessary urgent matters of business.
An equally big challenge was letting go of leadership and or ownership control. As business owners we tend to be control freaks. However this approach will eventually stunt the growth of the business and the sale value. The trick is to get the right people around you communicate with them and then have the confidence to slowly
The next biggest challenge (37%) was the business having enough liquidity to enable family members to exit. This is a common challenge that starts with having a succession plan that addresses these types of issues and then have the cash flow management and strategies in place to make it a reality.
While this survey makes for interesting reading the overriding message is that you need to have your business sale ready and you need a succession plan.
Published by Toowoomba Chronicle www.thechronicle.com.au on Saturday 26 August 2010.