One of the challenges business owners face is getting a fair price for their practice. When they retire, many industry professionals close the doors, without receiving recognition of business value.
But if you plan for your future you can work towards ensuring you receive full and fair value for your business.
Spread your growth and risk
A lot of business owners base their expectations on how they’re performing in a boom market. However, businesses can make money in any market. They often do this by operating across different geographies and working across diverse, even counter-cyclical, disciplines.
Danny Chung, National Head of the Built Environment with Macquarie Business Banking, believes in spreading risk.
“To mitigate risk, you should aim to have a diverse fee base of clients and referral sources,” Chung says. For this reason, Chung says the first step in maximising value should be to sit down and analyse your client base.
Think at least five years ahead
Successfully growing a business requires planning. Many built environment consultants get stuck doing the work and letting business growth take care of itself. It also means the consultant owner usually ends up “owning a job” rather than a business, and when it’s time to move on, they have little to sell.
One way around this is to actively plan for the future – imagining what you want to be doing in five or 10 years.
Given the built environment is so closely tied to the construction cycle, Chung adds that another aspect of long-term planning is analysing where you expect the economy to be. Once you have done this, you can orient efforts towards where you think opportunities may arise.
Look internally
When selling a business, many consider a scenario where an external company acquires them. That happens, especially if you have a specialty that another business wants to add to their offering.
If you’re trying to make your business attractive to an external party, you need to assess why they would purchase you.
You should spend time looking internally too. For small to medium-sized consultancies, it is likely that the person or people most interested in paying for your business will be your existing staff.
Chung says that it’s important to identify the buyer early, so that you can work gradually towards them taking over.
Get your structure right
When most people think of structuring their business, they think of the legal structure. Instead, it’s about analysing the running of the business to make sure that the people who you’ve identified to take over the business see doing so as part of their natural career progression.
Get your infrastructure right
Preparing for the day you depart doesn’t just mean priming your staff or looking for your successor. It also means making sure the intangibles, such as processes, intellectual property and confidential information, are documented, systematised and form part of the assets you will pass on.
This is where real value in your business lies –the ability of someone to run your practice without needing involvement from you.
Your checklist for making your business valuable
Ask yourself these five questions.
1. How many sources of work do you have?
2. How many markets do you play in?
3. How many specialties do you have?
4. Who holds relationships with your clients?
5. Who will take over your business?
This information has been prepared by Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502. It does not take into account your objectives, financial situation or needs. You should consider whether it is appropriate for you.
