We all like to think retirement is something we will get to eventually, when the time feels right. For a great many business owners across Australia, that date arrived like a thief in the night… and it did not care about how prepared we were; or are.
Recent research puts hard numbers on what has, until now, mostly been a feeling in the industry. Close to half of all Baby Boomer business owners plan to exit their business within the next one to five years, and the overwhelming majority cite retirement, not any change of heart about the business itself, as the reason. Worryingly, around a third intend to fund their retirement directly from the proceeds of that business sale. Against that, fewer than one in four business owners of retirement age have any idea of the business value, fewer still have anything resembling a formal succession or exit plan in place. More than one in five business owners in this country, according to data reported by the Australian Small Business and Family Enterprise Ombudsman, are already over the age of sixty.
That gap, between the number planning to leave and the number genuinely prepared, has always been a worry to me. It is not simply that a considerable share of this country’s small and medium enterprise value is in the hands of people wanting to exit, its that a) – they have no idea the funds they will exit with; b) the market is changing far more rapidly than we can track c) currently inquiry across the board is declining. Too many owners are sitting exposed, and they don’t know it.
Buyers do not simply purchase last year’s revenue. They ask whether the revenue can survive in these stressful times.
So what happens when tens of thousands of business owners decide, more or less at the same time, that this is the decade they finally step back?
The market does what markets always do when supply outpaces genuine readiness. It becomes selective. Buyers, and the finance sitting behind them, gravitate toward the businesses that can demonstrate they will keep running without their founder, and they walk straight past the ones that cannot.
I say this without any wish to alarm anyone, only to be honest with you. Waiting until the year you want to sell to find out what your business is actually worth is no longer simply inefficient. It is starting to look like a genuinely expensive mistake.
A business that depends entirely on its owner for every client relationship, every key decision and every piece of institutional knowledge is not a saleable asset. It is a job the owner has built for themselves, and a job cannot be sold to somebody else.
In my own succession planning work, the businesses that command a genuine premium are rarely the ones with the strongest trading figures viewed in isolation. They are the ones where the owner has, often years in advance, documented processes, developed a second layer of management, and had an independent valuation prepared, not as a formality, but as a genuine planning tool used to identify and close the gaps a buyer would otherwise find for themselves. I have worked with a family owned trades business that did precisely this, building a structured succession plan well ahead of the transition. The difference it made, both to the eventual outcome and to the family relationships involved, was considerable.
None of this requires an immediate decision to sell. It requires an honest starting point. Whether you are planning to exit next year or in ten years, the starting point is the same one I would put to any business owner in this position, an independent answer to what the business is genuinely worth today, and what would need to change for a buyer to agree with that number without you standing in the room.
The businesses that come through this wave well are not, in my experience, the biggest or the most profitable. They are the ones whose owners started the conversation early, while there was still time to act on what they learned.
If retirement is somewhere on your horizon, however distant it currently feels, the most valuable thing you can do this year is find out where you genuinely stand. Call Negotia Group on 1300 551 757 for a confidential conversation about your business and your options.
~ Kevin Lovewell
Kevin Lovewell is a Registered Business Valuer with Negotia Group. This article is general commentary based on published industry research and does not constitute financial, legal or tax advice specific to any individual business.
