Businesses: 6% Will Close Without Selling (ATO)

In Australia, that equates to about 120,000 businesses a year that do not sell, with owners simply closing their doors.  Alarmingly, this statistic is rising due to the large amount of businesses that are not adequately prepared for the issues they will face when the time comes to leave.  They haven’t built their business as a valuable asset with a Business Selling Strategy.  Escaping these statistics is easier than you may think.

75% Have No Succession Plan

The 3 top reasons business owners like yourself state as why they haven’t implemented a formal exit strategy is because

• they’re so busy working ‘in’ their business, they’ve failed to take stock and spend time working ‘on’ their business;
• they think it’s too hard and allow seemingly more pressing everyday tasks to take priority, ultimately losing focus of the big picture for their business with a business selling strategy;
• they don’t see the immediate need, particularly if they feel it will be some years before they wish to retire from their business

The Number of Business Owner’s that will Leave Due to Unplanned Circumstances is 51%

Business owners always believe they will choose the time when they will leave…..but in doing so, they lose control when they overlook the 6 Succession Triggers and fail to understand that only 2 of these can be controlled.  The other 4 exit triggers will adversely affect them, impacting heavily on their financial outcome when they exit from their business.  It doesn’t have to be that way.

How Do You Escape and Overcome the Succession Statistics?

I can’t cover all the ways for you here in a short blog post, but I can share a lot more techniques in the books, and also in a FREE Webinar.  If you are serious about your business direction, have a goal for the way you see it developing as a valuable asset that you can one day sell, you can’t afford to miss the opportunity.  Sign up for the FREE Webinar to learn how! You can do this by emailing your interest to my office at support@ybsprofits.com  or  call 1300 499 225 or (03) 9584 5099 to book your place. The session will be on 21 June 2011 and they will run in two timeslots, 2pm or 7pm for 45 minutes each.

Here’s to Your Profitable Exit Strategy!

Leigh Riley

I’m blogging to you from New York City and about to reveal the last 3 important reasons to think like a buyer when you sell your business. These are the points I emphasized to the editor of Inc Magazine (USA) when I was asked to list the things a buyer should look for when buying a business (these follow on from the previous two blogs)

Scenes form New York City: Columbus Circle in Manhattan

8.Systems and Processes

Buyers will want to check out the way your business operates as this will provide an indication of efficiencies. If it is a turnkey operation that anyone can run; and there are established, up to date training manuals, and all staff clear about their role in the business, buyers will pay a premium for that, so it makes sense to ensure you provide this if you are to profit the way you had hoped when you leave your business. If not, be prepared to have a buyer beat you down on price.

9.Leases, Plant, Equipment and; Machinery

Terms and life of leases of your business operation are essential so buyers will scrutinize these carefully. You want to make sure there are reasonable and long term leases in place to protect the continuity of the business operation. Operational equipment must be in good order, or else a buyer will be turned off believing they may be burdened with the need to inject immediate capital to upgrade for future efficiency of the business. Tired equipment, plant and machinery can be a massive drain on profitability, so sort it out before you sell, otherwise you can expect this to be reasoning to beat down your business price.

10.Exit Planning Prospects for the future

I know you’re thinking “why would it be important to a buyer to consider their exit strategy on a business they’re about to buy and probably not planning on leaving for some time?” It’s good question, but definitely don’t discount it because buyers today are thinking to start with the end in mind. That’s because the informed buyers knows one day they will want to also sell for a maximum price. The informed buyer also knows they may not always choose when they leave because unplanned events such as dispute, divorce, disability and death are a lot more common than is thought. You can help by thinking about the exit options for them, and one way to demonstrate this is to have your own exit strategy clearly mapped out. Financiers are now also asking for this information before they lend money on the acquisitions, so it really is in your interests to have this sorted out before you sell. On top of that, it will help you because what if circumstances force you out unexpectedly? Is this a business you are going to be able to off load quickly if you need to, and at a price that is satisfactory to you. If it’s a business that requires special interest or skills, you better start thinking about it now, before you sell, so you don’t get caught out and left strapped for cash.

You can read a lot more about these points I make in the book “Your Business Succession, how to enter, execute and exit your business for maximum cash flow and profit”

Here’s to Your Profitable Business Exit!

Leigh Riley

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I’m currently in New York City and when Inc Magazine (USA) asked me to comment on what a buyer should look for when buying a business, following on from my previous blog, here’s 4 more things I told them.

View from my rooftop of NYC – Manhattan Skyline

Where is your business positioned in the marketplace?  Does it dominate a particular niche or is it floundering in the fringes?

4. Marketing

Understand the purpose and motivation of why a buyer may want to purchase your business as this will enable you to use it to your advantage. Let’s say you have a business that is uniquely positioned in a manner that could provide a competitor with the competitive advantage they long for. This could be a strategy for you to build upon toward your business exit plan and develop a superior sale price.

On the other hand if your business is just coasting along but you have identified ways to improve the performance quickly, you can offer to demonstrate this to a a potential buyer, so you may retain their interest and prevent them from insisting on a reduction in sale price.

5. Ownership Structure

This is important to you as a seller particularly in relation to taxation and a buyer in terms of future ability to raise funds for expansion plans. A seller may need to go to the expense of restructuring to ensure they’re in the best position to profit after tax. This is something you must consider before you sell with the advice from a CPA.

6. Buying the shares versus the business

Sellers are usually advantaged by selling shares of a company (under Australian Tax Law) rather than the business itself, but if a buyer accepts this, they take on the liability factors of the company that could impact them adversely in the future, so they are generally reluctant to agree to this. One way to mitigate this risk for the buyer and encourage them to buy the shares for your benefit is to provide sale terms with ‘run off’ professional, product and public liability cover (funded by you as the seller) to protect their acquisition with insurance.

7. Management and Organizational Chart

Buyers are looking for a business that’s viability is not dependent on too much of their own physical effort. As a seller your business will be more attractive to a buyer when you can demonstrate the management and responsibility structure with an organisational chart to show who in the company has the rainmaking responsibilities versus the operational tasks. A clearly defined structure indicating little or no owner reliance can provide some comfort. Further to this, show how your key employees are remunerated with attractive employment contracts ensuring staff retention when you leave. You don’t want the buyer to have any fears about the key income generating staff leaving due to a change in ownership. Remember you’re not just selling your business; you’re buying selling everything that make the business work which may or may not include the staff.

So there you have 4 more good reasons to think like a buyer when you sell. In the next blog, I’ll reveal the last 3 which may arguably be the deal makers or deal breakers for the successful sale of your business.

Here’s to your profitable business exit!

Leigh Riley

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I am so excited to report that I successfully passed the Chicago Uni CEPA program which means I am now a fully qualified Certified Exit Planner and indoctrinated into the USA industry body known as CEPA.

Class photo from Chicago Uni – CEPA Program

To reward myself I decided on a quick trip to New York City where i was asked by the editor of Inc Magazine USA to contribute to an article about what buyers should look for when buying a business.  Over the next three blogs, I’m going to tell you everything that I told them, and this is important for you to take notes, because understanding what a buyer looks for when purchasing a business does effect you.  As a seller, you can make sure your business looks exactly like the type of business a buyer would want, and in doing so, your business will become the business that stands out in the crowd, and can command a premium price. That translates to a future set for financial security.

Here’s the first three key points that buyers are looking for:

1. Proven Financial Stability and Profitability

Buyers will want to check the historical performance of your business before they purchase and will verify reports against lodged tax statements.  They want to check out your business debt exposure and understand the debtors (money owed to the business by customers) and creditors (money the business owes to suppliers etc). If buyers are applying for finance to fund the purchase, banks will require this as part of their due diligence before they will approve a loan. If banks won’t lend, buyers may look to you to provide some assistance with Vendor Finance terms or some other financing mechanism, so you’ll need to be prepared for this. Financial data will give buyers a good understanding of how well your business has been managed financially, and enable them to gauge the ability of the business to borrow for expansion and capital improvements. Shrewd Buyers know the past is not always a good measure for the future, so make sure you offer your business plan to indicate a clear direction for the future of your business. 

2. Future Prospects and Forecasts

There are many businesses that have performed well in the past, but the future looks grim for them due to technological advancements or changes in demand and market trends.  You would be wise to provide some evidence of the future market conditions. If you are not sure why this matters, think about what iPods and iTunes have done to CD sales and you may have some idea of how trends can impact heavily on the future financial viability of the business.  Understanding your business future prospects together with a legitimate reason for selling can be a huge bonus in securing a buyer for your business. Take the time to research future prospects for your business so that buyers are secure in avoiding a dead end acquisition.

 3. Client Concentration

Consider where the main income of your business comes from and how much exposure it has to each client.  If your business receives more than 20% of its income from one source or customer, this is risky for the buyer especially if there are no service contract in place to protect the revenue source when you leave.   Everyone knows that when there is a change of management or ownership, there is a possibility of client loss, so take steps to ensure the income your business generates is secured with contracts, and that income sources are sufficiently diversified.  Income sources that are too heavily concentrated in one area, leave you open to the buyer haggling on your business price.

Like I keep saying, you need to think like a buyer when you sell, because it will help you to position yourself for strength and financial reward.

Here’s to your successful exit strategy

Leigh Riley

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The cost of failing to identify the economic factors that affect your practice:

Your practice valuation may change in line with economic trends, the needs of the community that you service, and the general perception of the value of your service to its community.

Staying abreast of market and patient demand can allow you to update your practice model, and taking those changes into account will be every bit as important as re-evaluating your practice value when seeking a buyer for your practice succession.

Practices operating in country and outback areas may have fewer potential succession options and eventual buyers, because many younger or up and coming GPs are reluctant to set themselves up for what they believe will be a life of isolation and a lack of social facilities frequently experienced in country areas. This results in multiple forms of loss – to the medical practitioner who is keen to sell the practice for a a fair profit, and to the communities of our nation’s country areas, due to the loss of essential medical services. With continued rising costs to the health system, the supply of doctors in remote regions slowly shrinks.

There are however win-win solutions that could help to turn around this dilemma…

CASE STUDY #2  – Practice succession strategy for a country GP

Dr Richard, a GP in a small country community, implemented a well constructed succession plan to overcome the difficulties he faced in selling a remotely located general practice. Here are the main features of his continuity strategy:

1. Dr Richard sponsored Ian, a talented student from his community, through medical school.
2. Ian, having strong family ties to the local area, was more likely than most to want to return to the region if he could be assured of career prospects there.
3. Dr Richard seized the opportunity to build his succession plan, and secured an agreement with Ian to join his practice as soon as Ian was fully qualified.
4. Both parties benefited from the agreement, with Ian receiving substantial financial support during his studies at medical school, and with Dr Richard gaining the assistance and continuity which he required, via a legal commitment from Ian to work in the practice.

There is nothing to prevent GPs in any location from developing a similar strategy to assure a potential candidate for their practice. Many Medical students will graduate with significant HECS debts, so may be attracted to the possibility of commencing their career with a clean financial slate, by accepting a similar arrangement as offered by Dr Richard to Ian.

Government incentives that may assist your practice succession

The Australian Government has instituted a scholarship program for medical students with the specific purpose of encouraging more GPs to practice in regional areas.

The Bonded Medical Places (BMP) Scheme allows up to 600 students to receive HECS reimbursements, in exchange for a commitment to work in districts where there are shortages of general practitioners. They must do so for a minimum of six years after gaining the general practitioner fellowship.

In addition, the Medical Rural Bonded Scholarship (MRBS) enables up to 100 students who are prepared to commit themselves to working in rural locations for a minimum of six consecutive years, after completing fellowship studies as general practitioners, to receive (from 2010) $24,207 per annum, tax-free, and indexed annually, while they study.

You can read more about the details of these scholarships my latest book, “Your Practice Succession: How to Leave a Legacy and Reap the Rewards of a Lifetime of Service to Your Community”

How prepared are you to exit your practice with maximum cash flow and profits?

Take the FREE quiz and find out!

To Your Profitable Practice Exit,
Leigh Riley

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Prescription for business succession disaster!

Bill and Ben were equal-share directors of a profitable medical supplies distribution business for ten years. They estimated the business value at around one million dollars. When Ben suddenly died in a car accident, Bill thought he would automatically borrow to buy out Ben’s shares from Ben’s beneficiaries, but he faced a number of unexpected problems.

• Problem 1: Ben’s estate attorney arranged a business valuation to determine the value of Ben’s ownership for distribution to his estate, revealing that the business value had grown to $1.5 million. For Bill to buy Ben’s shares, he would need to borrow $750,000.

• Problem 2: Although the business was going well (with both directors operating it), Bill struggled to find adequate finance (the maximum he could borrow was $350,000) because his personal debt commitments were significant and he had forgotten the business had previously provided personal guarantee security against a mortgage for Ben’s family home.

• Problem 3: Ben’s wife, who didn’t work, needed the money from the business to pay off the mortgage and meet other family expenses, so was applying legal pressure to Bill to do something to release some cash.

• Problem 4: Bill was extremely traumatised by the loss of his long-term working partner and the resulting financial challenges. The situation took months to resolve and affected the business operations in a way that negatively impacted sales fulfillment, which was predominantly Ben’s area of strength in the business. Customers became disgruntled and began purchasing from competitors, which in turn affected sales, cash flow and ultimately the business value.

• Problem 5: Ben’s eldest son Tom had been working in the business as a storeman, and felt he was entitled to move into Ben’s role automatically as a beneficiary to the estate. Although Bill had tolerated Tom working under Ben’s charge while he was alive, Bill could not entertain the idea of working directly with Tom because he was too inexperienced. On top of that, Bill had always found Tom to be spoiled, immature and irresponsible, so considered him to be an undesirable working partner or co¬owner.

• Problem 6: Bill was desperate to find another equity partner, but aside from Tom, no candidates presented. Bill was not able to form an agreeable arrangement with Ben’s widow, who was represented by strong legal counsel. The situation had become quite acrimonious and Bill was forced to sell the business. The business sold 18 months later for $1.1 million, some $400,000 less than its valuation immediately after Ben’s death.

A poor succession outcome for Bill

Bill had lost a large part of his life’s work through his inability to arrange capital funding to take full ownership of the business when Ben died. This was a heartbreaking loss from which he took years to recover.

Although Bill and Ben were excellent business people in so many ways, they made an enormous error of judgement by failing to plan certain aspects of their business that were essential to ongoing good management. During all their previous business planning sessions, they had never discussed a succession plan or taken the simple steps that could have easily prevented the stress and heartache that Bill, Ben’s widow, and Tom all endured.

How to prevent the forced sale of your business

1. Implement thorough succession planning measures, such as forming an agreement that contains funding mechanisms to release owners from debt and guarantee commitments, to ensure that all owners remain in a strong position to negotiate a sale no matter what the circumstances.
2. Educate yourself - read in detail about what Bill and Ben could have done to prevent this situation in the solution suggestions in Part 5 of my book “Your Business Succession: How To Exit Your Business With Maximum Cash Flow & Profits”
3. Conduct a FREE self-assessment of your readiness to exit your business profitably under any circumstances at www.BusinessExitQuiz.com

To Your Profitable Business Exit,
Leigh Riley

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Why you want to properly value your medical practice

Dr Dave, a GP nearing retirement, offered Dr Peta, a talented younger GP, a 20% stake in his Practice, as a retention strategy, and also as part of her remuneration package. They agreed verbally to a loose and informal buyout strategy, whereby Dr Peta would acquire the remaining 80% over four years, as part of the incentive bonus remuneration package on which both doctors had agreed.

The Practice valuation was based on Dr Dave’s own estimations, because both parties believed that it was not worth paying the accounting fee for a formal valuation.

Later, Dr Peta married, and soon afterward tragically died in an accident. Her new husband requested a formal valuation of the Practice and made demands on Dr Dave for payment to the value of his inherited shares.

The formal practice valuation was higher than Dr Dave had estimated, and because the shares had been offered as incentive (rather than being purchased) under a verbal agreement, Dr Dave didn’t believe that he should pay the spouse anything. Unfortunately the legal opinion disagreed, and Dr Dave had to pay up. Without available cash on hand, Dr Dave was forced to borrow the funds in a difficult borrowing environment, which required him to delay his retirement significantly, until the debt was repaid.

What’s more, finding an alternative potential buyer was difficult due to the lack of available candidates at the time. The costs involved in resolving the legal dispute far outweighed any initial succession set-up costs he would have incurred. If only he had sought professional advice from the beginning!

This case could easily have been an example of a viable succession strategy for the GP; instead it demonstrates a series of common succession strategy errors, all of which would have been avoided with appropriate professional guidance.

What Dr Dave could have done to prevent his practice succession nightmare

Dr Dave would have needed to include a number of vital measures:

• Invest in qualified professional advice to ensure the strategy would work for both parties.
• Organise a formal valuation of the Practice to determine the true basis price as part of the terms.
• Formalise the strategy with specified terms, in a legally written Buy-sell agreement, so that there could be no misunderstanding regarding each party’s rights, and so that loved ones would automatically benefit without distress or legal argument.
• Arrange insurance to meet the contingent aspects; this would have provided instant capital to pay out the deceased party’s spouse (thereby requiring no debt funding), and may also have allowed Dr Dave to retire fully funded, without the need to delay his retirement.
• Professional advice from exit experts would have ensured that the strategy would provide the most advantageous structure from a tax perspective.

How prepared are you to exit your practice with maximum cash flow and profits?

Take the FREE Business Exit Quiz and and find out!

To Your Profitable Practice Exit,
Leigh Riley

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How your family’s health can impact on your business exit profits…

In this series, I am revealing 6 of the Situational Errors that can prevent your business from capitalising when you exit your business at any stage, particularly when the exit is beyond your control. My previous post revealed the first of these situations, where Brian, the owner of a Mechanic workshop, had made an error in judgement about succession planning.  He did not see the need to implement a business exit strategy because retirement seemed a long way off at his age. Unfortunately he developed a severe illness which forced him to exit his business at a very young age, causing financial hardship for his family and job loss to his employee.

In this post I’m going to insist that you don’t limit your thinking to how your own health can impact the continued viability of your business, because this would also be an error of judgement. In my book “Your Business Succession” Case Study # 8 discloses how Judy’s profitable, home based clothing manufacturing business was forced to a grinding halt because her child was diagnosed with leukemia and in need of constant, ongoing care.

How prepared is your business to enable you to care for a sick child?

Judy had some very capable employees, but none were driven or talented enough to run the business without her leadership.

The smaller your business, the more vulnerable it can be if you have to exit early

The smaller your business, the more vulnerable it can be, so structuring your business with an exit strategy for diverse situations is essential if you want to maintain financial viability in the face of the unexpected.  Now you have read about two situations where the business owners thought succession planning was only for people about to retire.  Each had no way of knowing they would soon be forced from their business well before retirement age due to situations beyond their control.   Don’t leave your business exit strategy to chance. Make sure you’re in a position to profit – no matter what the situation!

Business succession solutions

Succession solutions exist for all business ownership structures.  A typical small business exit strategy involves arranging a formal Buy-sell agreement with another interested party. This could be with an employee or a colleague already operating in your industry.

For dozens of tips and detailed case studies to kick start your successful business exit strategy  and invest in your future you want to read the book “Your Business Succession…how to enter, exit and execute your business for maximum cash flow and profit”.  If you don’t find a solution to help you with your business exit plan, I will happily refund the purchase price!

How well prepared are you to exit your business with maximum cash flow and profit?

Take the FREE Business Exit Quiz, and receive your own customised report which will reveal the strengths of your business exit plan and uncover any shortcoming that you must address if you want to maximise your profitable outcome from your business when you exit  – through any circumstances.

Here’s to your profitable business exit!
Leigh Riley

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Overcoming Business Succession Strategy Weaknesses

My previous post consisted of a case study about how to eliminate or reduce tax payable when you exit your business, and in an earlier a post I identified the 8 Exit Strategy Weaknesses that you want to overcome for a more profitable exit outcome.

Being in business requires you to maintain updated knowledge of a vast range of issues, and the economic factors impacting your business are just as important as anything else I’ve covered in this blog series.

Understanding the trends that will develop and change your business as a result of economic factors will be crucial for the longevity and continued viability of your business.

On Friday I was speaking with a dentist who was busy factoring in demographic population shifts and social change to his business decisions.  He was thinking about how these factors that he had identified would affect his Dental Practice earnings over the next 10 years.  Cleverly, he is actively planning his business for the shift in demand, to ensure his Practice continues to remain relevant to the market and profitable well into the future.

Who would have thought that tooth repairs would be affected by changes to the economy?  But dentistry is a business like any other, and this very smart dentist is fully across that fact.

Here’s an economic reality that will affect every business, no matter what your industry or business focus may be.  The Global Financial Crisis (GFC) has had a long lasting effect in ways you may not have imagined.  Even if your business has grown and continued to prosper through this period, it is very likely it will bite you when you go to sell – unless you’ve put in place a healthy exit strategy.

How To Can the GFC Effect Your Business Exit?

If you’re expecting to sell your valuable business asset, start thinking about the price that someone will need to pay to buy.  If you’re like many business owners I’ve met, you may have built an asset that is not easily afforded without the buyer borrowing to purchase.

Now here comes the GFC crunch point: all financial institutions are scrutinizing very carefully the money they lend for business purchases since the GFC.  They will only lend to people who have substantial assets to back the loan, and in the absence of that, financial institutions require a very healthy business proposition with a high level of business asset backing and robust sustainable and proven cash flow.

That reality is certainly applying pressure to business owners who hope to make an easy sale in the immediate or medium term.  The situation isn’t likely to improve for some time, so it wouldn’t be wise to live in hope that it will pass soon.

How can you prepare to sell your business for the price you want?

You want to start preparing now!

• Boost your revenue and continue to show a healthy profit.
• Tidy up your business financial status.
• Identify the trends for your industry and start leading your business into the long term sweet spots of revenue earning.
• Develop a strategy that will position your business earnings for the long term.
• Think outside the square about who will buy your business, and how you can position your buyer to afford your business so you can exit with maximum cash flow and all the profits you deserve for the lifetime of effort you’ve invested in building your business.
• Gather a team of succession experts to assist you in locking in your strategy, and make sure they’re working collaboratively for your benefit, so that you receive the best possible solution that will overcome all the barriers we’ve identified.

If you need a quick summary of the aspects of your business that will get you started on preparing your business succession, you can take the Business Exit Quiz. It’s FREE, and you will receive a customized analysis of your exit readiness with a list of items that you need to work on to maximize your business sale price.  The 10 questions usually take 2-3 minutes to complete.  So what are you waiting for?  Click here now to take the Business Exit Quiz.

You could also read the book ‘Your Business Succession‘ for a comprehensive commentary on how to prepare your business for maximum cash flow and profit at your exit.  Order your copy of “Your Business Succession” online.

To Your Profitable Business Exit!

Leigh Riley

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Business Succession Strategy Weaknesses

In a previous series on why too many business owners fail to exit their business with maximum cash flow and profits, I identified 8 business exit strategy weaknesses that may contribute to a reduced business succession outcome for you.
My previous post in this series revealed how to eliminate or reduce tax payable when you exit your business through a powerful case study about the impact on final profits of tax payable by an Australian company at the time of business succession.

How Your Assets Are Structured Impacts Tax On Disposal Or Transfer Of Business Assets When You Exit Your Business – Case Study

Myra and Eddie developed a thriving print manufacturing company over their lifetime. Their children Beth and Robert both worked in the company. This was a family who really worked well together, so when Myra and Eddie were ready to retire from the company, they were confident about transferring the company to Beth and Robert as joint owners. They required no payment from their children for the business because their superannuation fund owned the factory (worth $5 million) from which the business operated.

The business would continue to pay rent to Myra and Eddie via their superannuation fund, which happened to be very tax effective and provided more than enough income for them to live comfortably. Myra and Eddie had also arranged for the factory to pass onto Beth and Robert as their beneficiaries, so they did not worry about ownership of their business premises.

The business succession appeared to be organised and settled, and they believed that everything was structured to be as tax effective as possible.  However, there was one big problem awaiting Beth and Robert that no one had considered. Not even their existing tax advisers and lawyers had anticipated this problem and its devastating effect, as they were not experienced with succession planning.

In this case, once Myra and Eddie passed on the factory via their superannuation to their beneficiaries, Beth and Robert, a massive tax liability resulted. As adult children receiving the proceeds of their parents’ superannuation accounts, up to 30% tax had to be paid on the account value. Inheriting the factory, valued at $5 million, would attract a tax bill of around $1.5 million.

There was no way Beth and Robert could afford to meet that liability without selling the factory. However, selling the factory caused another costly dilemma, because their business relied on the location and facilities in the factory to continue its operation. Relocating could not be arranged easily without incurring a lot of disruption and costs to the business.

The stress of the situation engendered undue tension between Beth and Robert. They began to argue about the options, leading Beth to decide that she wanted to sell out her half. Robert could not afford to buy out Beth. The situation became very difficult, affecting the business’s performance in a slow economic environment. Their business could not find finance in the prevailing market.

One simple solution would have been to use insurance over the couple’s lives to fund the anticipated tax liability payable on the transfer of the factory from Myra’s and Eddie’s super fund to the adult children.

Another option would have included a strategy to withdraw the business premises from Myra and Eddie’s super fund altogether. Under current tax law, no tax would be payable by Myra or Eddie provided they were aged 60 years or more; however, stamp duty would be payable on the transfer. It would be prudent to weigh up the transfer costs against the potential tax costs of transfer upon death before arranging, to ensure Myra and Eddie would not be disadvantaged. They could come to some arrangement with Beth and Robert to meet the transfer costs, which are likely to be a lot lower than the superannuation death tax that would apply.

You will find more specific information on how to reduce tax by choosing the best structure in Part 5 of my book, Your Business Succession: How To Exit Your Business For Maximum Cash Flow And Profit with specific solutions to Beth’s and Robert’s family’ succession problem.

How well prepared are you to exit your business with maximum cash flow and profits?

Take the FREE Business Exit Quiz (5 minutes of your time) and find out where your business succession strategy may be letting you down, and how to improve your chances of building a business for maximum profits and cash flow.

To Your Profitable Business Exit,
Leigh Riley

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