Page 11 - The Alp McNamara Downturn Survival Kit

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12. Revisit those succession plans
For the decade up to the GFC, we were busy facilitating Succession Plans for clients. In a lot of cases, those plans ended with the decision to prepare the business for sale. It was easy back then. The economy was booming, our clients had great businesses and there were heaps of buyers and money everywhere. Everyone was happy.
But the GFC changed all that. Businesses performances fell (along with business values), money became tight and buyers vanished. Very few businesses were even put up for sale and the succession plans for most were put on hold for many years. Those owners were not getting any younger.
So here we are again? It is probably early days yet, but the signs are similar. Will we have a recession? It would seem likely. Do all businesses go backwards? Strangely, some still do well when things get tough. Do buyers all disappear? No. In fact we sold our former business in the depth of the GFC mess.
Good businesses can still attract buyers and can still command a great price, particularly if they already planned for a surprise knock on the door. It is often called being “Investment Ready”.
Interestingly, no matter who the future owner of your business might be (your children, your people, your competitor) the business should always be Investment Ready. That invariably means that you have undertaken a succession strategy, looking at how the business is run (especially when you are not there to do it) and how it performs.
We had many cases where we were approached by business owners who said that they wanted to sell their business urgently. They had had enough. On closer inspection, they were not making money and it would be hard to attract a good investor for many reasons, not least was that the business was dependent on the owner. Frankly, the probable value fell significantly below their expectations.
What did we do? Typically a 3 to 5 year strategy to help the business work better and make more money. In nearly every case, it worked well.
Imagine the conversation. Mr and Mrs client, you have achieved the profit goals we set, and the business is finally attractive for an investor. Now is the time to sell. Yes, they say, but we now go on holidays and we are making lots of money. Why would we sell?
But they could at any time because they are now in a position of power and control. There may not be a knock on the door for you for a few more years but what better time to update your succession strategy and become investment ready.