Author: Tom Haigh
Baby boomer small business owners must act now to secure their financial future and retirement.
It was a conversation with good friend, guru business advisor and the best footballer to ever play reserve grade for the Wyong Roos – Andrew Beattie – that made me realise the enormity of the changes ahead for owners of small businesses across the country in the coming 10 years.
The simple facts.
80% of all small businesses are currently owned and operated by baby boomers who are entering their 60s and 70s.
Within the next 10 years, 70% of all baby boomer owned businesses will be sold to service the retirement plans and associated financial needs of their current owners.
Source: Scancorp, 2018
Have I got your attention? Good, because the next bit is a real hairy beast. Andrew revealed an issue which was even more alarming than the statistics above – most small businesses are worthless. So reliant on the leadership and commitment of the current ‘owner-operator’ that without them, the business functions poorly, or cannot function at all.
It was a realisation that really hit home to me as both of my parents are heavily invested in a business they have spent their lives building from the ground up, both being of retirement age, and who would both admit to being too involved in the business for it to be attractive to a future investor.
Of course, it’s not all doom and gloom. These business owners have options, my parents included. They have the choice to maximise the attractiveness of their business to a future owner and to achieve a financial outcome they deserve. They have the ability to transform their business into a systemised, well-oiled profit-making machine – the type of highly saleable business that author Michael Gerber preaches about in his global best seller “The Entrepreneurial Myth”. Smart people are already getting the right advice from people in the know, like Andrew.
Ignoring the business itself for a moment, there is one big thing which almost all business owners overlook when contemplating the future sale of their business. Something that with the right planning can completely transform the overall financial outcome with far less effort than re-engineering the business. What I’m referring to is the development value of the freehold, or real estate owned by the business.
For business owners who are fortunate enough to operate out of buildings or on land which is owned by the business or related entities – they may well be sitting on a gold mine! Real estate with development potential can result in a financial windfall that will drastically change the retirement picture for many small business owners.
Why? With the passing of time, the highest and best use of a property will often change. What may have been the highest and best use of the land at the time of purchase, may be completely different to the present highest and best use. This can be due to any number of things, changes to land zoning and planning controls, such as:
Allowable height and the developable floorspace;
Gentrification of a particular suburb or neighbourhood; or
Higher demand for developable land due to an ongoing increase in the local population.
As a case in point, look at the 2016 success of the Goodman Group, who lease office space to many small businesses across the country. Goodman achieved a reported $250M in proceeds from the sale of a business park in Macquarie Hills to apartment developer Harry Triguboff of Meriton Group.
The most important question for any business owner who falls into this category is “how?” How do you gain an understanding of the true potential of your freehold, and most important of all, how do you go about realising that potential to best serve the needs of your retirement plans, and the ongoing needs of our business?
The good news is that what may seem like an overly complex exercise, is quite simple. When you approach the exercise by applying a tried and tested process, the same way any great small business operates day-to-day, the opportunities will flow.
This helpful Blueprint will give small business owners an understanding of how to go about understanding and realising the true potential of their property assets.
In my experience, the most important things to do are to get good help and to act while you have the time to do so. Whether that be employing a business adviser to assist in getting your business ‘sale ready’ or engaging the services of an unbiased property consultant to help realise the maximum value from your freehold, it is crucial that all small business owners take action now. Most of all, it is crucial they make smart, informed decisions that can put them in the position they want to be in, prior to retirement!
If you are interested in learning how Groundswell’s skills, expertise and industry contacts can help you to achieve the desired outcome with your property, contact us now to book a complimentary appointment.
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