I think it is bad enough to close your Business doors because you can’t sell, but consider this GPs story.

Dr Francis had served his community in a Practice established over 30 years.  With no business operational skills learned throughout Medical School, Dr Francis was like many of his peers: a very good doctor concerned for his patient’s welfare, with little interest in the business matters of his private Practice.  Honourable as that may seem, it did not serve him well.  Nor did it serve his loyal staff or the patients he’d so diligently cared for over 3 decades.  When he was eventually forced to exit due to ill health, and a new owner could not be found for his Practice, his only option was to close his doors. 

This was a disaster with a threefold effect:

1. His staff were adversely affected being suddenly without jobs

2. His community was impacted heavily due to loss of his valuable services

3.  His personal finances were hit hard, because not only did he not receive any financial consideration for his lifetime of efforts, but he had to meet an obligation owed to staff for long service leave payments and other entitlements.  The insult to injury was that it meant he must pay out money to leave his Practice.

Avoid a similar situation

• Start by educating yourself about the options you have.  In the books ” Your Business Succession”  and “Your Practice Succession” you can find all the practical tips to positioning your business on a course of strength and success through any of the identifiable succession triggers.  
• Sign up for the Live FREE Webinar to learn more about what you can do to successfully exit from your business, despite the circumstances. You can do this by emailing your interest to my office at support@ybsprofits.com  or   call 1300 499 255 or (03) 9584 5099 to book your place. The session will be on 21 June 2011 and it will run in two timeslots , 2pm or 7pm for 45 minutes.

Here’s to Your Profitable Exit!

Leigh Riley

Business Exit Profits Key #2 | Video

One of your core business exit goals is to keep as much of the profit from the sale of your business as possible. To achieve this you want to have a business succession plan that takes advantage of Capital Gains Tax Concessions that are available to business owners who meet certain criteria.

View this short video to discover four types of Capital Gains Tax (CGT) Concessions that may boost your business exit profits.

Four tax concessions that may provide capital gains tax relief when you sell your business in Australia.

These only apply if your business meets the definition and eligibility criteria of a small business.

1. 15 Year Exemption provides 100% capital gains tax relief.  It means your business must have been operating for longer than 15 years without any change to its structure or ownership during that period and to qualify you must also meet certain further criteria.
2. 50% Reduction Exemption can provide 50% relief from capital gains tax, but only if you meet the eligibility criteria.
3. CGT Retirement Exemption provides 100% capital gains tax relief on up to $500,000, but only if you meet certain eligibility criteria which may vary with your circumstances.
4. CGT Rollover Relief provides 2 years automatic deferral of capital gains tax.  It applies only if you meet the eligibility criteria and you are using the proceeds from the sale of your business to purchase another business.

Capital Gains Tax Eligibility Rules

The eligibility rules are too complex to go into detail here, but you can read all the details in Chapter 16 of my book ‘Your Business Succession: How To Exit Your Business For Maximum Cash Flow And Profits’ which demonstrates the effects with real life case studies.

To be certain of your eligibility you should seek the advice of a qualified, certified practicing accountant (CPA or CA), and you want to do this well before leaving your business so you can make full use of the available concessions.

More Business Exit profits Keys

Read about the other six Business Exit Profits Keys in detail here.

Secure your own copy of my book ‘Your Business Succession: How To Exit Your Business For Maximum Cash Flow And Profits’ for real life business exit case studies that show you what you want to do to to ensure your cash flow and profits are maximised when you leave your business, through either planned or unplanned circumstances.

To Your Profitable Business Exit,
Leigh Riley

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Seven Business Succession P.R.O.F.I.T.S. Keys

All business owners want to exit their business with maximum cash flow and profits. My previous posts and series have mostly focused on identifying the habits and faults that will weaken your business’s potential to generate the cash flow and profits you desire when you leave your business, either through planned or unplanned circumstances.

This post holds out a candle of hope by presenting practical exit strategy steps as I introduce you to my Seven Business Succession P.R.O.F.I.T.S. Keys. My next series of blogs will detail real life case studies in which I will refer frequently to my Succession P.R.O.F.I.T.S. Keys, so this is a timely opportunity to introduce them:

Succession Profit Key 1: Proceed with the End in Mind

• Plan your business and exit sale NOW
• Set your exit goals
• Schedule and program the implementation of your business exit plan
• Formulate policies prevent fraud within your business
• Develop standardized procedures to support your business policies
• Create systems
• Employ the right people

Succession Profit Key 2: Reduce Tax by Choosing the Best Structure

• Seek advice about the right structure to minimize exit taxation from the start
• Plan to leverage capital gains tax relief laws

Succession Profit Key 3: Organise Your Business to Be Free from Debt Commitments

• Understand your obligations with guarantees
• Inform yourself about different types of guarantees
• Discover how to release your business from a guarantee
• Recognise when you can transfer responsibility to another guarantor

Succession Profit Key 4: Flag Potential Funding Solutions for Your Profitable Succession

• Explore your exit strategy options
• Identify various vendor finance arrangements
• Understand Buy-Sell Agreements
• Consider the possibilities of an ESOP (Employee Share Ownership Plan)

Succession Profit Key 5: Identify Ideal Buyers and the Selling Process

• Prepare early to find a buyer
• Learn how to identify a potential buyer
• Formulate your Business Vendor Statement
• Find your potential buyers
• Plan for the transfer
• Buyer – conduct due diligence
• Seller – conduct due diligence
• Negotiate your sale price
• Finalize your contract of sale
• Be prepared for post-sale emotions

Succession Profit Key 6: Take Control of Your Business Sale Price

• Be prepared for unplanned events and exits
• Have a plan to cover disputes within your business that may affect your profitable exit
• Insure against contingencies
• Understand the various types of business insurance that you may need
• Use insurance to protect your business sale price
• Understand how to structure insurance ownership for a smooth and profitable succession

Succession Profit Key 7: Seek Guidance from a Team of Suitably Qualified Succession Specialists

• Understand why you really want a team of succession experts to guide your business exit plan
• Appreciate the role of each specialist with a succession planning team
• Assemble your team succession specialists

To Your Profitable Business Exit,
Leigh Riley

PS
My next post will begin a series of real life business exit case studies. While you wait, please feel free to take advantage of these resources to make a start on your profitable business exit strategy now:

1. Take the Business Exit Quiz (it’s FREE and will take no more that 5 minutes of your time) to find out where your exit strategy may be letting you down, and how to improve your chances of building a business for maximum profits and cash flow.
2. Read my book “Your Business Succession” to discover what you must do to ensure you will overcome any potential situation with P.R.O.F.I.T.S outlined earlier in this article.

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4 Leadership And Management Challenges That Cause Business Exit Problems

Four business leadership and management challenges have the potential to impact the success of your business profits at all stages of the business cycle, and may have a particularly dramatic impact at the time of exit, depriving you and/or your successors of the result you anticipated from your business succession.

Business succession problems arise from one or more of the five exit strategy weaknesses I identified previously:

1. business strategy weaknesses.
2. structural faults.
3. situational errors.
4. sustainability breakdowns.

Reason # 5, business leadership and management challenges, is the subject of this post.

The 4 business leadership and management challenges that cause business succession problems:

1. Does Your Successor Have the Skills to Keep the Business Operating Profitably? Financial Capacity and Competency – If your potential buyer does not have the financial capacity to buy you out in one lump sum, you are left financially vulnerable.
   The buyer’s personal credibility, integrity, credit history and financial responsibility becomes a further risk for the seller to consider, because the seller is effectively providing credit to the buyer. If the new owner’s capacity to operate the business is impaired in any way, the result could dramatically drive down the end sale price you receive.
   Loyalty to Your Staff and Customers -  Some business owners won’t mind how the business is operated once they’ve left, particularly if they’ve received their full financial settlement upon transfer. However, others may have built up a substantial loyal customer base and will leave behind staff with whom they’ve developed caring relationships. Other business relationships, such as those developed with suppliers, may also be impacted by a change of ownership in your business.
   These established relationships can burden the exiting owner with feelings of responsibility, so it’s important for them to ensure that the new owners have the skills and integrity to treat all the remaining parties in a fair and appropriate manner. You will want to be sure they can continue to operate a viable service so those people who have served you well during your business life are looked after.
2. Failing to Declare Income Reduces Your Business Value and Will Not Attract Your Most Profitable Buyer.
   Business owners who operate on a cash basis without declaring their true income through annual tax returns will not be able to present their business as viable and profitable, so not only are they breaking the law and placing a heavier tax burden on other members of the community, they are also doing themselves a great disservice. If a buyer can be found, it will almost certainly be at a price that is much lower than the seller would desire.
3. A Poorly Systematized And Poorly Documented Business.
   Business owners who hold all the client and supplier details, business procedures and other operational data in their head, rather than documented in an orderly format, are doomed to failure in their attempts to obtain a buyer at the business’s true value.
4. Sibling Rivalry.
   When the head of a family business fails to demonstrate strong leadership when deciding which child should succeed him or her, it can be a major source of conflict that has the potential to lead to family breakdown.
   Common sense says that the child who has the most skill and aptitude should be chosen to take the helm, but emotion and family dynamics can lead to an inability to determine this fairly.
   Conflict in a family business will usually lead to operational problems that will cause a downturn in the business, thus affecting the business value and its eventual sale price.

In my latest book, “Your Business Succession : How To Exit Your Business For Maximum Cash Flow And Profit” you can read three real life case studies (Cases 16, 17 and18), which detail the business exit consequences of poor leadership and management decisions made by business owners, and how those outcomes could have been avoided with appropriate planning for a profitable and stress free business exit.

Your business succession strategy should cover all the leadership and management issues we have just identified for you.

In a future series I’ll share some case studies that will help you to understand the influence of each of these sustainability breakdowns in detail, so you can plan how to overcome these problems before they can have any impact on your profitable business exit.

In the meantime please feel free to take advantage of these resources to make a start on your profitable business exit strategy now:

1. Take the Business Exit Quiz (5 minutes of your time) and find out where your exit strategy may be letting you down, and how to improve your chances of building a business for maximum profits and cash flow.
2. Read my book “Your Business Succession” to discover what you want to do to ensure you will be prepared to steer clear of any of the leadership and management challenges outlined in this article.
3. Contact our Business Succession Strategy office to plan your business succession strategy, so we can eliminate the stress of making the right decisions for your best chance of maximizing your business valuation for a profitable exit.

To Your Profitable Business Exit,
Leigh Riley

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Your business exit profitability is directly dependent upon the ability of your business to continue to operate at a sustainable or profitable level.

Business succession problems are the result of one or more of the five weaknesses that I have previously identified:

Reason #1 was strategy weaknesses.
Reason # 2 was structural faults.
Reason # 3 was situational errors.
Reason # 4, sustainability breakdown, is the subject of this post.

Three sustainability breakdowns have the potential to impact the success of your business exit, and therefore your business exit cash flow and profit.

The 3 sustainability breakdowns that cause business succession problems:

1. Family Business Continuity Problems.  In Chapter 10 of Your Business Succession the Cabernet family represents an example of the difficulties associated with business continuity when one or more co-owners want to exit, but the remaining owners wish to continue. If the owners who wish to continue do not have the financial capacity to buy the exiting parties’ shares, they can be forced to give up their life’s work.
2. Buyer Market Limitations – Barriers To Entry. The barriers to entry into your business may limit the number of potential available buyers in the marketplace. This, in turn, may delay your business exit if adequate time and planning is not applied to find a suitable successor. Main barriers to business entry include:

• licensing and registration restrictions
• financial limitations
• funding limitations
• emotional barriers
• the burden of debt

3. Failure To Recognize When It Is Time To Leave. Staying beyond a reasonable time can drive a business into ruin if you’re no longer capable of running it at peak performance. You must be truthful with yourself about when the right time is to leave if you want to exit your business with maximum cash flow and profit.

In my latest book, “Your Business Succession | How To Exit Your Business For Maximum Cash Flow And Profit” you can read three real life case studies which detail the sustainability breakdowns suffered by business owners in three very different industries, and how those issues could have been avoided with the right business exit strategy.

Your business exit strategy should cover all the relevant sustainability issues we have just identified.

In a future series I’ll share some case studies that will help you to understand the influence of each of these sustainability breakdowns in detail, so you can plan how to overcome these problems before they can have any impact on your profitable business exit.

In the meantime please feel free to take advantage of these resources to make a start on your profitable business exit strategy now:

1. Take the Business Exit Quiz (5 minutes of your time) and find out where your business exit strategy may be letting you down, and how to improve your chances of building a business for maximum profits and cash flow
2. Read my book “Your Business Succession” to discover what you want to do to ensure you will be prepared to sidestep any of the  sustainability issues outlined in this article.
3. Contact our Business Succession Strategy office to plan your business exit strategy, so we can eliminate the stress of making the right decisions for your best chance of maximizing your business valuation for a profitable exit.

To Your Profitable Business Exit,
Leigh Riley

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