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Business Exits

Sell Your $5m-$20m Business

Most business owners leave millions on the table when they sell - simply because they don't understand how business exits work. 

There is a strategy and a discipline in selling your business for high multiples. Not every business can be sold, and not every business can be sold for high multiples, but our procedures and checklists can help you determine whether yours can be one of them.

We have a system that shows you:

  • why you would sell your business,
  • when to sell it, and
  • how much to sell it for.

 

Top Ten Reasons to Sell a $5m-$20m Business

Companies are sold, not bought. A business exit is often the single largest financial opportunity of an entrepreneur's life. The true test of how successful you are in business comes when you sell your company:  were you able to convince someone other than yourself to buy into the dream?  

Behind the decision to sell are a number of drivers.  Which of the following ring true for you?

Strategic Re-evaluation:

Businesses may decide an asset or division no longer fits their corporate strategy due to misalignment with core goals, resource demands, or debt repayment needs. For instance, Woolworths Group divested its petrol stations to EG Group, refocusing on its core retail operations, demonstrating a strategic shift to enhance corporate focus and resource allocation.
Retirement Planning: 

Many business owners plan to fund their retirement by selling their company. Dick Smith, the founder of the electronics retail chain that bears his name, sold his business as part of his retirement planning, starting again in philanthropy, exploration, and publishing.
Divorce Complications: 

Personal life changes, such as a divorce, can necessitate the sale of a business to divide assets. The divorce of a co-founder in a well-known Australian tech company led to the sale of shares, showing how personal circumstances can impact business ownership.
Next Generation's Disinterest: 

When the next generation is uninterested or unsuitable for taking over the family business, selling becomes a viable option. An iconic Australian retail brand faced this situation, leading to its sale when the founder's children chose different career paths.
Market Competition: 

The entrance of a dominant player can threaten existing businesses. The arrival of Amazon in Australia prompted many small retailers to reassess their business models, with some choosing to sell or pivot their operations in response to the e-commerce giant's presence.
Health Issues: 

An owner or an owner’s spouse may develop health issues that force a reconsideration of the amount of time spent in the business. Maggie Beer’s promise to her husband to slow down prompted her to sell her remaining shares in Maggie Beer Products to Longtable Group, allowing her to focus on personal well-being and other interests.
Banking Pressure:

Tightened lending criteria can force asset sales. The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry led to tighter lending criteria, impacting small business owners and their ability to maintain or expand operations without selling assets.
The Dripping Tap: 

Continuous financial losses may force owners to sell rather than inject more capital. A boutique Brisbane fashion retailer sold its business after years of financial losses and challenges in the competitive retail landscape, unable to sustain further personal investment.
Operational Limits: 

Entrepreneurs sometimes reach a point where their business outgrows their expertise. Nick Molnar and Anthony Eisen, co-founders of Afterpay, entered into a merger with Square (now Block, Inc.), a strategic move allowing Afterpay to leverage Square's global reach and technological expertise for further growth.
Capitalizing on Market Conditions: 

Owners might choose to sell during a high in the market when business valuations are better, ensuring they get the best financial return from their investment.  Apple acquired a total of 32 AI startups in a single year, the highest number among tech giants, ensuring owners of these startups were able to exit at high multiples.

 

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Top Ten Reasons Selling Your $5m-$20m Business Can Benefit You Personally

Selling a business for high multiples not only signifies a successful exit but also offers transformative benefits for the business owner. Here are the top ten reasons:

Financial Security:

The most immediate benefit is financial gain. Selling a business in this price range can secure an owner's financial future, providing significant capital that can be used for retirement, investment, or starting a new venture.
Relief from Debt: 

Selling the business can relieve the owner of any associated business debts or obligations, including loans and mortgages that may have personal guarantees attached, reducing personal financial risk.
Opportunity for New Ventures: 

With the capital from the sale, an owner can pursue other interests or business ventures that may have been unattainable while managing the sold business.
Improved Work-Life Balance: 

Running a business demands time and energy. Selling can dramatically improve an owner's work-life balance, allowing more time for family, hobbies, and personal health.
Reduction of Stress: 

The stress of managing business operations, financial risks, and employee welfare is lifted post-sale, leading to improved mental and emotional well-being for the owner.
Achievement of Personal Goals: 

The sale can enable the realization of personal goals, such as travel, purchasing a dream home, or funding an education for children or grandchildren.
Legacy Creation: 

By selling at the right time, an owner can ensure the business's longevity under new ownership while preserving their legacy within the industry or community.
Family Dynamics: 

Selling the business can positively impact family dynamics, removing any potential conflicts related to business succession or the burden of running a family business.
Philanthropic Opportunities: 

The proceeds from the sale can provide the means to give back, allowing owners to contribute to causes they are passionate about, fulfilling philanthropic desires.
Personal Growth: 

Transitioning away from the business opens up avenues for personal growth, whether through education, new hobbies, or simply the opportunity to explore new paths without the constraints of business ownership.

 

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The Two Types of Business Exit

In our experience, we usually see two kinds of business exits:

  • The first is an exit from a low strategic value business.
    • This type of business has a low competitive advantage, exists amongst many similar businesses and offers little synergy to a buyer.
    • The sale of such business depends upon the buyer continuing the business and/or generating additional revenue by improving and enhancing it.
  • The second is an exit from a high strategic value business.
    • This business has considerable competitive advantage, often unique/hard to copy/ extensive intellectual property and it offers assets that can be leveraged by a larger corporation.
    • The sale of such a business enables the buyer to leverage its position in the market place.

So, when you are thinking, "how do I sell my business," our system first sorts your business into one of the two types above.  We then go through the "Buyer Discovery Process" that shows you to whom your business will appeal.  For example:

  • The first type of business appeals to a "financial buyer." This is a buyer that is seeking inherent profitability in the business.
    • This buyer pays only pays low multiples of EBIT.
  • The second type of business appeals to a "strategic buyer." 
    • This is a buyer who will exploit the underlying strategic value of the business - often without regard to its present inherent profitability.

Our expertise is in applying a system to seek out those assets, relationships and competencies that might appeal to a strategic buyer. The aim of the system is to justify a higher valuation, increase your EBIT multiple and de-risk the business so that it potential buyers find it attractive.  

So, when you are wondering how to sell a business, rest assured that there is already a system in place to take you through it step by step.

 

 

What We Do For You

If we take on your mandate, we project manage the whole transaction. We can:

  • Show you how to align management, staff and shareholders to the sale,
  • Advise you on how to create value quickly in the business,
  • Write the information memorandum,
  • Run the vendor's due diligence,
  • Coach you on how to negotiate with potential buyers, and
  • Guide you step-by-step through the deal itself.

We show you a methodology to identify the best buyers - those buyers who stand to gain the most from acquiring your assets - and we work with you to negotiate a price that would not be possible without expert assistance.

 

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The Difference Between a Business Broker, Corporate Advisor, and Investment Bank

Different buyers approach buying your business differently.  The method you choose to sell your business should mirror the buyer's approach.  Typically, sellers of businesses valued at up to $2m-$3m use a business broker.  In general terms, a business broker is focussed on selling your business in its current form quickly.  Business brokers advertise it widely and act as your agent in the sale.  They are not typically intimately involved with getting your business transaction ready, simply because they work on commission and are not paid to spend months with you preparing your business for sale.

We are corporate advisors - and corporate advisors are different to business brokers.  Corporate advisors work with you for months before a sale showing you on how to prepare your business for buyers, identifying potential buyers, and advising you on how to negotiate.  

Corporate advisors do not, however, act as your agent or advertise your business for sale.  The reason is that when you have the right advice, you will know who the most probable buyer of your business is, you will know how to approach them yourself, and you will know what to say when you do approach them.  
Corporate advisors get involved with businesses valued between $5m-$20m.  In many cases, once you have the documents prepared and been through the “Buyer Discovery” process, you will find that you can sell the business yourself just using your team of advisors. Alternatively, you can do it through a business broker and negotiate a reduced fee as most of the preparatory work is done.

Business sales in the $20m+ range usually go to investment banks, corporate finance houses or the corporate finance divisions of large accounting firms.  The reason is that the deals are more complex, there are fewer buyers able to finance such transactions, and many more people are needed to handle the multiple aspects of the deal.  

Investment banks, corporate finance houses or large accounting firms usually don't get involved in sub-$20m deals as the deals are often not large enough to support their fee structures.

How Business Brokers Work

Business brokers often have backgrounds in real estate broking.  Thus, the approach to selling a business is not dissimilar to their approach to selling a property.  They spend time with you getting a description of the business, they prepare a flyer and an information memorandum, they advertise the business for sale, they work with you in dealing with the enquiries, and they assist in the documentation of the deal.  

A business broker works largely on commission.  This means they are transaction oriented and do not, as a general rule, get involved in:

  • preparing your business for sale, or 
  • working out a higher valuation based on strategic factors.  

The fact that they work largely on commission means that they have an incentive to sell the business quickly.  Some brokers have particular expertise in certain industries and have a lot to add in terms of securing a successful sale.

Business brokers sell all manner of businesses from cleaning franchises, to sandwich bars, to panel beaters.  

How Corporate Advisors Work

Corporate advisors usually have a background in law, business, strategy, or accounting.  They often come from large law firms, accounting firms, or management consultancies.  They are not interested in selling cleaning franchises or sandwich bars, but they are interested in selling medium-sized businesses to the much large companies that they once advised.

Corporate advisors work with you to prepare your business in advance for sale.  They undertake everything from developing your Value Proposition, redoing your branding, advising on cost-cutting and revenue enhancement, and showing you in detail how to clean up a business for sale.  They work with you from a position of knowing what large companies want in an acquisition and showing you how to make your business fit the buyer's requirements.  Typically, a corporate advisor's engagement is longer than a business brokers because there is more work to be done in preparing the business in advance.

The true value of a corporate advisor to you is the ability to articulate your business's strategic value to a strategic buyer - who may then pay a premium to acquire it. 

 

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