File photo. A business development manager says many business owners were not fully prepared for selling. Photo: Sun Media
Ready or not, one in four small and medium businesses are expected to come up for sale over the next decade as the baby boom generation retires.
Link Business Brokers business development manager Steven Matthews said there was expected to be a boom in the number of businesses for sale over the next few years, which will favour buyers over sellers.
However, he said about half of the businesses owned by baby boomers were unprepared for sale, which could end up costing them in lost value or even an unsaleable business.
"In reality, many are not fully prepared for sale, and failure to address key issues prior to listing could erode up to 30 percent of their value," he said.
Matthews said boomers should set aside one day a month to plan for sale, with a focus on identifying, reducing and mitigating risks.
"A structured risk-mitigation plan increases buyer confidence and strengthens long-term business sustainability," Matthews said.
He said it was also critical for buyers to see opportunities for growth.
"A lack of scalability often deters potential buyers, especially in a competitive market."
He said business systems also needed to be structured and efficient.
"Poorly documented processes, outdated technology, and reliance on informal operations can delay or derail a sale.
"Vendors should ensure that core functions-including sales, customer service, supply chain, and financial management-are optimised."
Most importantly, financial transparency was critical.
"Inadequate financial reporting is a common reason deals fall through."
Matthews said retirement planning goes hand in hand with the sale of the business, considering many owners expect the proceeds of sale to add to their nest egg.
