Planning your exit and valuing a business for sale

Michael O'Connell on when to start planning your exit date...

"I have a very particular view on that. I think you should go into business with a view to selling - especially these days.

"Most businesses should change their senior management and certainly their strategy around every eight years. If you look at that as the top of the curve – the Sigmoid or bell curve if you like – if you don’t start looking at what you're going to do to get out of the business and get the value in the business from day one, then you'll tend to get trapped in the job of the business."

On knowing when it's time to think "I should sell my business"...

"A point at which you haven’t hung on too long to the business, either for your own skill set or opportunity in the market. If every day your market becomes closer to being commoditised... it's obviously better to sell on the way up than on the way down."

On why business valuation is more art than science...

"Valuing a business is a bit like valuing a painting before an auction. Anybody can give a price and come up with 10 reasons why it is that price.

"It’s not the same as valuing a house or a property, where you can look at a bunch of similar properties selling in the area over a short period of time. I prefer the vendor to come up with the valuation themselves, and then we discuss how likely it is that we’re going to find someone willing to buy at that price.

"If they don’t have a price in their head then they’re probably not a seller anyway."

On the impact of the global slowdown on business sales...

"If you can dig a hole then you can make money. Small to medium businesses are finding it tough in many regards. Mining and its spin offs [are still doing well]. If you’re a biotech company or small IT company then you’re going to find it hard.

"Small to medium enterprises always find it hard to sell their business because it’s not easy to get money to buy a business in Australia. Once you get a reasonable figure then it’s very difficult to get money and you therefore have to justify to your lender as to why it’s a feasible business proposition."

On what constitutes a good choice of business broker...

"Someone who speaks their language. You can go to the biggest and best, and they can be very professional, but if they don’t understand, or if there isn’t a personality click, it’s very difficult to get trust into the scenario.

"Selling and buying businesses has a lot of emotion connected to it, so it has to be someone you can trust."