How accurate is your estimate of the value of your business?
Just over one third of small to medium-sized enterprise owners have completed a formal valuation of their business but 67 percent believe the value of their business has increased over the past 12 months.
The latest findings of accountancy firm RSM Bird Cameron’s thinkBIG 2014 study also reveal that as retirement is looming for an increasing number of business owners, many are feeling insecure about being financially capable of managing their retirement and are making plans to combat this.
Andrew Graham, national head of business solutions, RSM Bird Cameron, says “While some owners might have a rough idea of what their business is worth, often this figure can be far from accurate. It is important to maintain a solid knowledge of the business’s value, especially when relying on the proceeds from the sale of the business as the primary source of retirement funds.”
Tax concessions also remain unknown to many SME owners with 61 percent saying they are not aware of the tax concessions available upon sale, though this has risen from 54 percent in 2013.
“These concessions ultimately reduce the overall taxation liability that arises as a result of the sale of the business,” says Graham. “Not only is it important to consider these concessions, but also the structuring of the sale transaction, which can have a fundamental impact on both the price a potential acquirer is willing to pay and the ability to extract the maximum after-tax sale consideration for the owner.”
The study found that 42 percent of SME owners have a plan to exit the business and 52 percent of those with a plan to exit anticipate that they will leave their business within the next four years.
More than one third (36 percent) of respondents expect the proceeds from the sale of the business to be their primary source of retirement funds.
“Reliance on the sale of the business to fund retirement reflects the generally poor investment returns over the past few years as well as the need to sell external assets to help fund the business while things have been tough,” says Graham.
- thinkBIG has measured the pulse of the Australian SME sector for nine years. It benchmarks business growth and profitability, business planning, exit planning, and superannuation. 504 business owners participated in the 2014 study, providing insights into how Australian SMEs feel about their business