With the start of a new year we reflect on the year that has been and prepare for what we all hope will be a positive and fun 2015. Most of us like to think that since the GFC (Global Financial Crisis) we are all now heading into more positive buoyant times. But even now, business confidence is low and results are patchy. There is an old adage that says if we continue to have the same strategies that we have in the past, then we shouldn’t be surprised when the results are the same as we have experienced in the past. Indeed, these days, even doing the same as we did in the past won’t guarantee that we have the same results. We need to look at matters differently.
Consider for a minute the following information.
The average age of a family business owner in 2013 was 58. In 2010 the average age was 55. Without the benefit of actual current data, let’s assume that this trend is continuing. Based on that assumption this year the average age will continue to rise to 60, and by 2020 it will be 65. That is the average age, meaning that many business owners will in fact be considerably older than this.
Now let’s consider a second statistic. 64% of these business owners in 2013 would seriously consider selling if approached. That number is up from 61% in 2010. Again without the benefit of actual current data, let’s assume that this trend is continuing. So this year 66% would consider selling if approached and by 2020 this number would rise to 71%.
This year (2015) the average age of a family business owner is likely to be 60 and 66% of them would consider selling their businesses if approached! These numbers alone, without the continuing trend into the future, point to a looming crisis. At some point many of these businesses will hit the market. The laws of supply and demand suggest that with increased supply and no corresponding increase in demand, there will be downward pressure on prices. Family business owners are likely to receive less for their businesses when they do chose to sell. In times like these only businesses that are genuinely valuable will sell for a good price.
The only way out of this is to either not sell and load the responsibility of running these businesses onto the next generation, or take action now to ensure that your businesses are indeed genuinely valuable.
Transforming your business or professional practice into a genuinely valuable and saleable asset is a process most business owners need support with. For assistance to commence or progress on your journey, speak with your usual Hanrick Curran Adviser or call 07 3218 3900 and ask for Tim Taylor or Matthew Beasley.
Thanks to Scott Patterson for contribution to content.