Australia is approaching a significant changing of the guard in private business.

Almost half (48%) of Baby Boomer business owners aged 60–78 plan to exit their business within the next one to five years. Yet only 24% of SME owners and operators have a succession plan in place.

Those are big numbers. But the more important question isn’t how many businesses will change hands.

It’s how many of those businesses will actually be ready when their owners are.

Because deciding you want to exit and having a business that’s ready to be sold are two very different things.

Buyers will have choices

As more owners look towards succession or exit, there will inevitably be more businesses coming to market.

Some will pass to the next generation. Some will be acquired by competitors or other strategic buyers. Private equity will play an increasingly important role. Others may transition to management or new ownership structures.

But whatever the pathway, owners need to recognise something important: a buyer doesn’t value your business based on how many years you’ve put into it. They value what they’re buying and what that business can deliver without you.

That’s where preparation matters.

At MYMAX, we’ve worked alongside private business owners through growth, acquisitions, succession and exits, often from both sides of the transaction. One thing we’ve seen repeatedly is that the best exits rarely begin when someone decides it’s time to sell.

They begin years earlier.

Start by making yourself less important

For many private business owners, the characteristics that helped build the business can eventually become a constraint on its value.

The owner holds the key customer relationships. The team looks to them for the important decisions. They understand the numbers better than anyone else. Critical knowledge and processes live in their head.

That’s often perfectly workable while the owner is there.
To a potential buyer, however, it represents risk.

One of the most valuable things an owner can do in the years before an exit is therefore somewhat counterintuitive: build a business that needs them less.

That means developing a capable leadership team, transferring relationships, documenting key processes and creating clear accountability for performance.

It’s worth asking a simple question:

If you disappeared from the business for six months tomorrow, what would stop working or lose value?

The answers are a pretty good place to start.

Know what actually drives value

Owners often have a number in their head for what their business is worth.

The market may have a different one.

Rather than waiting until you’re ready to sell to discover the gap, understand well in advance what drives value in your particular business – and what a prospective buyer is likely to see as risk.

Recurring and predictable earnings, sustainable margins, customer concentration, management capability, quality of financial reporting, intellectual property, systems and future growth opportunities can all influence the attractiveness of a business.

The earlier you understand those drivers, the more time you have to improve them.

Don’t wait for due diligence to tell you what’s wrong with your business.

Get your numbers – and your story – straight

A buyer needs confidence in the numbers.

But they also need to understand the business behind them.

• Why has the business performed as it has?
• Where will future growth come from?
• How dependent is revenue on particular customers, people or products?
• What investment will be required?
• What are the genuine opportunities for the next owner?

Good financial reporting is part of being exit-ready, but so is being able to clearly articulate the strategy and opportunity.

If it takes months to untangle the numbers or explain how the business really works, that creates uncertainty. And uncertainty rarely helps value.

Don’t confuse succession with exit

An exit isn’t always a clean sale and a walk out the door.

For some owners, the right answer will be family succession. For others, it may be a management buyout, trade sale or private equity investment. Some may sell part of the business, retain equity and participate in its next stage of growth.

The important thing is to understand the options before circumstances narrow them.

That requires owners to think about two things at the same time:

What do you want from the next stage of your life?
And:
What does your business need to look like to make that possible?

They’re connected.

Give yourself the luxury of time

Perhaps the biggest advantage an owner can have when exiting isn’t size, growth or even profitability.

It’s time.

Time gives you the opportunity to strengthen the leadership team. Reduce customer concentration. Improve margins. Put better systems in place. Clean up financial reporting. Transfer relationships. Consider different transaction structures. And, importantly, decide what you actually want.

It also means you’re making decisions from a position of choice rather than urgency.

For an owner who thinks an exit might be three, five or even seven years away, it can feel too early to start planning.

But from our experience working with private business owners, that’s exactly when the planning should begin.

Australia’s founder transition is already underway. For buyers and investors, that will create opportunity.

For owners, it should create a different question:

If the opportunity to exit arrived sooner than expected, would you and your business be ready?