Value Adding News - February 2010WOW - a little over 1 more month and the year is 25% over - how are your budgets looking for 2010?
In this month's issue
Will 2010 be a good year for your business? An audio interview with Professor Neville Norman, Melbourne UniversityAs the Australian economy continues its recovery mode, Professor Neville Norman tells us the news is good for most but not all sectors.
He predicts further interest rate increases during 2010, and reveals his forecasts for growth, inflation, unemployment and the Australian dollar, in this interview with Michael Schildberger of Business Essentials.
To listen to the full interview click here
As we have described in other areas of this site, the value of your business is directly related to the potential cash flow in the future. So it makes sense to build your future cash flow pipeline by developing relationships with larger organisations.
myBRC Complimentary Article - Developing relationships with larger organisations
But there is another reason to develop strategic relationships with other businesses - they can also provide a valuable exit strategy in the future. If the relationship is managed correctly, your strategic partners will see how valuable your business really is and be prepared to pay a premium for it at a later date.
This month's complimentary myBRC article is by Robin Power from Affinity Maker, who describes how to develop relationships with larger organisations.
To access the full article follow this link to our Free Info section and click on the link to the myBRC website.
Are you meeting your financial goals?
Late last year we were asked whether buyers had come back into the market, looking for businesses to purchase. So we conducted a survey of small businesses around Victoria to find the answers (you can download a copy of the survey here). The results were a real eye-opener for everyone.
More than 1 in 2 metropolitan-based businesses had received an offer for their business in the past 12 months, with 1 in 3 regional-based businesses finding the same thing.
This has been supported by other larger independent surveys from other consulting firms that found many medium-large organisations had plans to make an acquisition in the next 12 months.
What was even more surprising was that many of the offers received were considered to be "fair and reasonable" - but the three most common methods of arriving at that conclusion were:
Most people that are looking to buy a business are trying to get it for a rock-bottom price. So most initial offers will be "low ball" ones that should be dismissed. The worrying trend is that some people compare this offer with past profits and say "fair enough - I am getting out". Unfortunately they may be throwing away hard earned value that could be in their pockets, as it is the future profits that should be important to the buyer.
- Comparison with recent profit performances.
- A previous offer was lower than the current one.
- Had been advised by the accountant.
Even if the current offer has increased from any previous offer, very few business owners had a clear and rational explanation for whether it was "fair and reasonable". So some of these business owners could still be handing over a business they have worked hard to create, only to decide not to "get paid fairly" for the effort they have put in.
But by far the most significant finding of the survey came from looking at the businesses that were meeting their financial goals. Over 70% of these business owners had received an offer in the last 12 months. There is one important conclusion to this:
This makes sense - why take a punt on a failing business in the hope you can do it differently. In the current economic conditions it is less risky to invest in something that is showing profits and strong performance than to try to turn a loss-making business into a successful one.
- A financially successful business is more likely to attract a real buyer than a business performing poorly.
The final key message from this survey is that for most businesses an offer may be just around the corner. Rather than wait for this to happen, business owners should be preparing themselves and their business now - so that when a buyer gives you an offer you can immediately explain why that isn't a good offer and present a confident and detailed explanation of what the business is really worth. This puts you in control of commercial negotations and will more likely result in a better financial outcome for you than the buyer.
To read the complete survey - download your copy by clicking here.
What is your business worth now? How long do you want to wait to get a return on your investment? Are you and your business prepared for someone to make an offer tomorrow?
Contact us now to discuss your situation and discover the range of options available to you to make sure you get the best price for your business.
Chris Nolan of Ragged Edge 4x4 discusses what value means to his businessWe have been working with Chris Nolan for over four years, first helping to establish operating procedures and an expansion strategy for his regionally-based gym KC7, then later in assisting to establish his 4x4 hire drive business as the only extreme 4x4 hire/drive business in Australia.
This is the first of three parts to an interview we conducted with Chris recently. In it he describes how he went from an idealistic dream of running a business for lifestyle reasons, to a business plan focused on building value from the opportunities he could create.
Read the Part 1 of our interview series here.
Our newsletters will be covering a range of topics this year, including:
Newsletters For 2010
What else would you like to know about? What questions have you had about your business and its value?
- When do you create value - Part 2?
- What is succession planning all about?
- How effective business networking can significantly increase your business value.
- The industries positioned for huge growth in 2010 and beyond.
- How can SMEs use acquisition to create value?
- Getting the financing mix right.
We want to provide you with information that helps you - so let us know by sending us an email or by going to our Contact Us page and filling out the enquiry form.