Top 10 Exit Planning Mistakes

We have compiled a list of the common mistakes business owners make when they exit their businesses.

1. Bad timing – judging the best time to sell is important to maximise the price received.

2. Not being proactive – waiting for the perfect deal is like waiting to win the Lottery– it is highly unlikely.

3. Not considering all your options – Discuss with your broker the potential target market and the sale options.

4. Being distracted – do what you do best – run the company. Let the professionals market your
business and negotiate the best deal.

5. Not knowing your value – what is your business worth now?

6. Where to next? – An important part of exit planning is answering that question. As soon as you start to think about selling, act on it as you are likely to be distracted and take your eye of the ball and stop running the business with all your energy.

7. Tax implications? – Your accountant should be part of your team implementing your exit plan.

8. It takes time – selling a business is much more complex than selling a house so allow plenty of time. Information has to be assembled, multi-pronged marketing strategies need to be implemented, legislative and tax implications need to be understood, and almost certainly there will be unexpected
roadblocks and challenges before settlement.

9. Hard work ahead- do not get overwhelmed with the task ahead. If you have an experienced team handling the process they will smooth the way and sort the problems.

10. Ensure your listed price is correct- Agents spend a life time educating their clients about value- when you are selling head your own advice.

BDH Solutions are rent-roll agents with over 30 years experience in connecting the right vendor with the right purchaser. To stay up to date with our latest listings, register here.

Ten questions you must ask when you do a rent roll valuation

1)    What are you valuing?

Is it the shares in a company, the assets of the business (rent roll, plant & equipment) or is it a part interest?

2)    Why?

What is the purpose of the valuation? Buy/sell decisions, merger, tax/estate planning, partnership or marital splits, litigation support etc.

3)    Which standard of value?

There is an accepted method of valuing rent rolls and sales goodwill.

4)    When?

What is the effective date of valuing the rent roll? Generally speaking rent rolls are sold on a fully leased basis, with the value being determined as at the date of settlement or within 7 days of the settlement date.

5)    What is the key information of the business?

Management agreement signed in the name of the correct entity, current financial information, staff/wage details, suppliers’ contract, systems and procedures, operational leases. Full information will unearth the value modifiers.

6)    What risks does the business face?

Competition, retention of key staff & clients, restrictive covenants, loss of major customers, technological or legislative changes, economic conditions.

7)    What intangibles drive productivity and profitability?

These need to be identified and assessed for transferability. They will range from contracts to relationships, client databases, and personal goodwill.

8)     Audited financial accounts?

For almost all SME the financial accounts will include “one-offs” or discretionary expenses that are not strictly necessary for the production of income, therefore the accounts will need to be adjusted. Also review the trends in the business’s figures? Historic data is a guide but is no guarantee of future performance.

9)    Which are the appropriate valuation methods to use in this case?

When selling a rent roll or business on WIWO basis there are a number of components that make up value; such as the length of time the agency has managed the properties, commission rates and ancillary fees, geographic locations of the properties managed etc.

What does the market say?

All valuations are opinions. The only true test of value is an arms-length sale on the open market. Data from actual sales of similar businesses provides a valuable guide. Is the business saleable?

BDH Solutions are rent-roll agents with over 30 years experience in connecting the right vendor with the right purchaser. To stay up to date with our latest listings, register here.
 

Factors that influence the value of a rent roll

There are a number of factors that influence the value or worth of a rent roll. We have listed below a checklist for your reference;

1.       Number of properties under management

2.       Number of landlords

a.       Number of multiple landlords

b.      Number of owner related properties

3.       The % of commission obtained each property

a.       Trust system report only give averages of entire rent roll

4.       Geographic spread of properties

5.       The $ of management fees per property per annum

6.       Management fees - $per annum

7.       Letting fees for last 12 months

8.       Sundry fees for last 12 months

9.       Type of properties under management

10.   Length of time each property managed

BDH Solutions are rent-roll agents with over 30 years experience in connecting the right vendor with the right purchaser. To stay up to date with our latest listings, register here.

Confidentiality agreements

Confidentiality agreements (also called nondisclosure agreements, confidential disclosure agreements, and secrecy agreements) are contracts that govern the disclosure of confidential information by one party (the disclosing party) to another party (the receiving party). Confidential information is exchanged for a promise of secrecy. The disclosure may be unilateral, bilateral or multilateral. Confidential information disclosed in a confidentiality agreement might pertain to Intellectual Property and information of the seller.

The confidential information has value precisely due to the fact that is known to only a few, that is, open disclosure will be injurious to this value. Disclosure of this information is often totally against the owners’ interests. The owner may be that their customers, suppliers and staff are not aware that a sale is contemplated until much later in the process. The owner also needs to be assured that any prospective buyer has the background experience, skills, and financial resources to successfully buy and run the company.

Safeguarding confidentiality is a major issue for business brokers. A confidentiality agreement can either stand alone or be included as part of a broader agreement. An appropriately drafted confidentiality agreement should contain a list of standard provisions and exceptions. In special cases, where the disclosing party wishes to carefully protect the confidential information, the agreement might also include extra strong clauses and articulated security provisions.

BDH Solutions are rent-roll agents with over 30 years experience in connecting the right vendor with the right purchaser. To stay up to date with our latest listings, register here.

Buyers and Sellers need to be aware of the factors that influence value.

There isn't a blanket formula that you can apply to rent rolls in arriving at a price.

There are a number of factors that influence the value of a rent roll;

1. Number of properties managed

2. Ratio of landlords to properties

3. Geographic spread of the properties managed

4. The commission rate

5. Amount of sundry income charged such as letting fees, postage etc

6. Length of time each property has been managed

BDH Solutions are rent-roll agents with over 30 years experience in connecting the right vendor with the right purchaser. To stay up to date with our latest listings, register here.