Exit Smart Report 2024
Secure your future with a plan
Small business is big business in Australia, accounting for over 97% of all businesses nationally1. Yet a worrying trend is shaping the sector.
The small to medium enterprise (SME) sector is ageing. The most common age of small business owners across Australia is 50 years, compared to 45 years in 20062. This is creating a sense of urgency for many business owners about how to exit their venture when they are ready to hang up their work boots.
Many are unprepared.
William Buck’s 2024 Exit Smart Report examines the exit readiness of Australian businesses.
With findings based on national research, our Exit Smart Survey spans a diverse cross-section of businesses spanning different industries and at different points of their life cycle.
The common thread is that many business owners haven’t, or don’t know how to plan for the time when they will exit their enterprise.
1 2
https://www.asbfeo.gov.au/small-business-data-portal/number-small-businesses-australia
https://www.asbfeo.gov.au/media-centre/media-releases/small-business-owners-getting-older#:~:text=Ombudsman%20Bruce%20Billson%20said%20
Key findings of business owners plan to exit within the next 10 years (up from last year at 72%)
business owners do not have an exit plan (down from 6 in 10 last year), which implies they are beginning to understand the importance of exit planning of owners say retirement will be the key driver to exit their business (up from last year at 42%) 76% 38% 48% 5 out of 10
of business owners have a very good understanding of the drivers in their business that generate value
Key findings (cont’d)
49%
of owners have not had their business valued in the last three years 66% of owners have considered whether their post-sale lifestyle will be adequately funded 60% 4 in 10 businesses are tax effectively structured to achieve the best sale value of business owners are looking to exit their business in the next 5 years
About William Buck
William Buck has provided exceptional accounting and advisory services to the middle market and beyond for over 125 years. Our team of over 140 partners and 1,100 professional staff across 10 offices throughout Australia and New Zealand are committed to providing the experience and solutions you need, with the dedication and relationship continuity you deserve.
360-degree support
William Buck is an integrated firm that works collaboratively across technical and industry specialisations. We provide holistic advice to help you successfully navigate every facet of your business exit – from planning through to execution and ensure your post-sale financial needs are met or managed on an ongoing basis.
More than just advisors
At William Buck, we are more than just advisors. We strive to make a positive impact on the lives of our people, clients and communities. Our approach is relationship-driven. We know that people do business with people, so developing meaningful relationships built on trust and integrity is fundamental. We value open and transparent communication which underpins our engagements and leads to the best possible exit outcomes for our clients.
“William Buck’s communication with both parties was excellent. Adrian, our William Buck advisor, hit every point that might’ve been a contentious issue, certainly with the purchaser. He made them aware of every issue up front. The attention to detail right through was incredible.”
–
Byron Hughes
Our local and global networks
As a member of the Praxity Global Alliance, the world’s largest alliance of independent accounting firms, we are supported by an extensive international network, with access to more than 76,600 professionals in over 120 countries.
With members in all major world economies and financial hubs, this global alliance provides a valuable opportunity for business owners looking to exit as it casts a net internationally to capture interested parties.
Our Exit Smart spokespeople
Mark Calvetti Head of Corporate Finance
Mark provides high-quality strategic and commercial advice to business owners and boards, focusing on growth, acquisitions, disposals, capital restructuring, mergers, takeovers, IPOs, valuations and due diligence. Mark has his finger on the pulse of dealmaking activity in Australia and this year, was one of Australia’s 11 top dealmakers chosen by Ansarada to attribute to its M&A ANZ Outlook 2025.
Todd Want Head of Tax
Todd advises private businesses on a broad range of tax issues such as capital gains tax and advice relating to structuring and restructuring, acquisitions, divestments, small business CGT concessions, Division 7A and trusts. Todd is the current president of The Tax Institute and a CAANZ and CPA Australia member and regularly prepares and presents papers on changes to tax legislation and interpretations.
Brett Kean Head of Business Advisory
Brett provides tailored advice on acquisitions, tax structures and benefits and the application of GST concessions in relation to property investment and development. He has specialist knowledge in succession planning, structuring solutions and strategic planning to assist his clients in achieving their business and personal financial goals.
Scott Girdlestone Head of Wealth Advisory
Regularly ranked by Barron’s and The Australian as one of the country’s top financial advisers, Scott’s vast global experience has seen him work with highly successful individuals and families, helping them to create and secure a prosperous financial future. Scott specialises in unique investment strategies and transferring wealth from businesses to their owners in a highly tax-effective manner.
Our Exit Smart spokespeople (cont’d)
Garth O’Connor Price Head of Restructuring and Insolvency
Driven by his passion for analytics and working through in-depth financial reporting, Garth’s clients appreciate his attention to detail and objectivity, enabling him to understand their businesses thoroughly. He is motivated by the opportunity to rescue declining businesses, systematically identifying the root causes of distress and stabilising – even revitalising – those entities.
Grant Martinella Head of Audit and Assurance
One of Grant’s greatest strengths is his ability to interpret complex accounting issues and provide accurate, timely advice in response. He has extensive Big Four experience in London, Brisbane and Adelaide and specialises in ASX-listed companies, large proprietary companies, not-for-profits and trusts. Grant is known for building strong relationships with clients and helping them find ongoing solutions to best manage risk.
Foreword
Time to exit? Time to plan
Australians are an entrepreneurial lot. The nation’s 2.6 million actively trading businesses are dominated by small to medium enterprises (SMEs), and for many business owners, their venture is a prime asset.
Indeed, in many cases, it is the asset that will define the owner’s retirement lifestyle.
Yet despite often being described as the backbone of the Australian economy, members of the SME community can find themselves grappling with new and complex issues when the time comes to make an exit.
Our survey highlights the lack of preparedness among many business owners – whether through an on-market sale or a transfer of ownership to family members.
On one hand, this is understandable. SME owners are often required to wear many hats. They are time-poor and must juggle many responsibilities. Realistically, many go into business because they are experts in their particular field – and only rarely does this include knowledge of business exit strategies.
But life has a habit of delivering curve balls.
Despite the best laid plans, business owners can find themselves unexpectedly needing to sell for a variety of reasons.
Our report looks at why so many owners are unprepared for this event, and what they can do to put plans in place to maximise the value of their enterprise.
“Exit planning is an important precursor to the sale of your business, as it helps to ensure that a business is in the best position to go to market.”
Mark Calvetti Head of Corporate Finance
Your Succession Planning journey
Respondent snapshot
Who took our survey?
As the leading insight into how business owners approach an exit strategy, our survey reflects the views of 216 business owners across each state in Australia.
While no single industry dominates our dataset, one in five responses came from each of the property and construction industry (19.9%) and the health sector (19%).
Professional services (12.5%), manufacturing (8.8%) and agribusiness (7.4%) rounded up the top five industries represented in our survey, with the remaining respondents coming from industries as varied as retail, hospitality, mining and education.
With seven out of ten (73.1%) respondents having annual revenue below $10 million, our report chiefly addresses the views of small to medium (SME) enterprises.
That said, close to one in ten (9.7%) respondents have annual revenue between $10 million and $20 million, while at the far end of the scale, only 4.2% have annual revenue above $100 million.
What industry does your business operate in?
What is the approximate annual revenue of the business?
Growing value in your business
Popular strategies for business growth
While not every small business will grow to become a big business, business owners typically want to see their enterprise expand and prosper.
From a business perspective, growth through the exploration of new revenue streams or markets can bring diversification that helps to protect the longevity of an enterprise.
There are other pathways to growth too.
Over seven out of ten (73%) enterprises are looking at growing value organically – that is, by making the most of the existing resources to nurture sales and revenue growth.
The remaining one in three businesses aim to achieve growth by acquiring other businesses, or through a combination of organic growth plus acquisition.
There is no doubt that the current commercial market presents a wealth of opportunities for growth via formal acquisitions.
As a guide, over the last 18 months, the William Buck team has observed increased ‘roll-up’ activity, whereby smaller companies in the same industry are consolidated into a large company, particularly in the health sector and most notably in the general practitioner and dental space.
Similarly, the consulting services industry has noted a rise in bolt-on activity involving the acquisition of small companies with limited financial and administrative infrastructure.
In this way, organic growth continues to be an effective strategy that allows a business to tick several goals – consolidating its position in the market, acquiring specialised expertise and expanding product offerings.
How are you presently looking at growing value in the business?
Exit strategy and plan
Six out of ten plan to exit in the next decade
No one knows a business like its owner. So, it’s no surprise that eight out of ten (78%) business owners believe they have a ‘good’ to ‘very good’ understanding of the key value drivers in their enterprise. Even so, this leaves more than one in five (21.8%) owners who don’t have a firm grasp on what drives value in their business.
For many small to medium business owners, their enterprise is a valuable asset. It is not uncommon for business owners to rely on the sale of their business to provide funds for their retirement. By not having a good understanding of the factors that generate value, it is impossible to identify how these drivers can be improved to increase the value of a business to the owner’s advantage.
As a general rule, the value of a business is measured by its financial results. However, these are shaped by a combination of the products and services the business sells, the innovations it adopts, its customers and market share and its employees and the processes they follow.
Having a clear grasp of these factors as they apply to your own business is critical. It is the first step in understanding what drives value, and from here, this opens up pathways to enhancing a venture’s value as part of an exit strategy.
Getting this right is critical because the majority (64%) of business owners plan to exit their businesses either in the short term (1-5 years) or medium term (6-10 years). Despite these relatively short time frames, 53% of business owners do not have an exit plan. Our experience suggests that business owners who put in place a plan get better outcomes.
“While the value of your business is often measured by financial results, these results are driven by your customers, your people, your internal processes and your products and innovations. Understanding and improving these drivers is critical to enhancing your business’s overall value.”
Brett Kean Head of Business Advisory
How do you rate your understanding of the drivers in your business that generate value?
Exit strategy and plan (cont’d)
The gap between goals and action
When it comes to exit plans, there is often a mismatch between goals and the steps taken to reach them.
As we’ve noted, large numbers of business owners (36.6%) expect to move on from their businesses within the next five years. However, less than one-third (30.6%) have plans in place to guide their business through that exit.
Alarmingly, around one in six (16.2%) business owners are in the dark about whether they have an exit plan in place at all.
This gap between expectations and action can be attributed to a number of factors.
“Given that a sale process in the current market takes at least 12 months, the earlier business owners start thinking about their exit strategies, the better, as this allows enough time to adequately prepare the business for exit and ensure a streamlined transaction process.”
Mark Calvetti Head of Corporate Finance
When do you think the current owner/s will exit the business?
Exit strategy and plan (cont’d)
It pays to plan ahead
Among business owners who do not have an exit strategy, one in three don’t believe an exit plan applies to their circumstances. One in four (25.5%) don’t intend to exit in the short term – though it is always worth planning for the unexpected – and a further one in five (19.4%) have never sought advice about an exit strategy.
Interestingly, 14% believe the enterprise will remain within the family. However, when it comes to handing over the baton of a business from one generation to the next, business owners need to act with care. Indeed, this is an area that can benefit from formal succession planning. A handover can take several years to complete and there is plenty of scope for family harmony and long-held relationships to be tested and even adversely affected by a business handover.
This allows time for any issues to be discussed and resolved and ensures family harmony is maintained –something that can only be achieved when each family member is engaged, understands and agrees on the transition process.
Meanwhile, our survey has recorded a noteworthy decline in the number of business owners who have never really thought about an exit plan.
In 2024, fewer than one in 20 (4.6%) business owners say they haven’t addressed the issue, down from 9% in 2023.
While this reduction is a plus, it may be that more challenging trading conditions through 2024 have seen a growing number of business owners focus on the ‘here and now’ rather than thinking ahead to when they trade in their chips.
If the business does not have an exit plan in place, why not?
Not applicable
The business has not sought advice about an exit strategy/ or plan
Don’t plan to exit in the short to medium term
I have never really thought about it
Business will remain in the family
The leading exit trigger
The one event most likely to trigger an exit
Running a business is no mean feat. It can be demanding, and business owners can often feel they are ‘on call’ for their business 24/7.
The flip side is that a business can also be a valuable asset – one that many SME owners rely on to fund some of their retirement. This may go a long way to explaining why 20% of self-employed Australians have no superannuation savings4
This highlights the need to plan for a business exit because our survey confirms that close to one in two (48.1%) business owners say retirement will be the trigger that sees them exit their enterprise.
This is followed by one in four (26.4%) who say they will exit as a means of seeking value from their investment.
Other trigger points are less certain. One in four (23.6%) will exit when they receive an unsolicited offer for their enterprise – an event that is far from guaranteed.
One in five (20%) expect to walk away from their business as part of a family succession plan.
The catch is that the timing of many of these events cannot be predicted with great accuracy. This underlines the need for a business to be exit ready at all times.
What do you believe will be the trigger for the current owner/s exiting?
Exit strategy and plan (cont’d)
Worries abound but so do exit pathways
Do business owners have concerns about whether they should sell? Absolutely.
By far, the most pressing concern for almost one in two (43.5%) business owners is whether they will achieve the desired sale price. This is followed by close to two in five (38%) who worry that they will not be able to find a buyer at all.
In addition, one third (35.6%) of business owners are aware that the success of the business hinges heavily on their involvement, which is a genuine concern.
‘Key person risk’ – in other words, the dependency on key people, such as owners, for the ongoing success of a business – is something that savvy buyers will bring to the table. The more involved business owner/s are in the day to day running of a venture, especially where critical relationships are concerned, the higher the risk and our team note that this risk can reduce the valuation of an enterprise by 30%.
Our survey confirms awareness of the various ways in which owners can exit their businesses. Almost one in two (44.9%) have considered a trade sale. One in four (28.7%) are planning a family succession and a similar proportion (26.9%) are aware of the possibility of a private equity buyout.
One in five (20.8%) business owners have even considered a management buyout, which may be an option, especially in smaller ventures where there are no clear buyers. Our team, for instance, has seen examples of business owners funding loans to the management team to finance a full or staged buyout of their business.
“These trends are in-line with what we are observing in the market, with many owners opting to sell the entirety of their business to trade or private equity buyers over family members, who may not have an interest in continuing the business.”
Mark Calvetti Head of Corporate Finance
Exit strategy and plan (cont’d)
Primary concerns if you were to sell
Receiving the desired sale price
Being able to find a buyer
The busines is highly reliant on owners
The impact of prevailing economic conditions
Continued security of employment for staff
Family members not staying employed or losing interest in the business
Clients won't remain with the business
Keeping key information confidential
Which of the following exit strategies or plans have been considered?
Strategic exit concerns
Addressing the ‘what ifs’
It’s a given that business owners want to maximise the value of their business as part of their exit strategy.
Yet one of the key stumbling blocks is a lack of awareness of what the venture is actually worth.
The majority (65.7%) of businesses have not been independently valued in the past three years.
This can leave owners in the dark about what their business is really worth, potentially leading to selling the venture for less than it is worth. Conversely, owners may fail to secure a sale because the asking price is too high.
This underscores the importance of business owners gathering independent views on the value of their business.
Strategic exit concerns (cont’d)
Considering your exit options
The decision to exit a business can be stressful. This stress can easily be compounded when business owners don’t have a grasp of the various exit options available.
The ‘X-factor’ is when a business is in distress.
Our survey shows that close to seven out of ten (69%) owners do not have an exit plan. And while 26% would sell in good economic conditions, what about the flip side? What if market conditions decline and owners are forced to contemplate a sale during weak economic conditions?
One in five (21%) business owners are concerned about the impact of prevailing economic conditions on a sale. But there can be a solution.
By pushing the ‘reset’ button and restructuring a business in the short term, an enterprise can be set up for a medium to long term exit plan that allows the owners to maximise the venture’s value and leave its historical baggage behind.
Understanding the range of turnaround options, and developing a contingent restructure plan, offers a pathway for embattled business owners to hope for the best while planning for the worst.
What matters is that expert advice is sought to help protect a venture against downside risks while still positioning for the upside.
Does the business currently have an exit plan in place?
Are you aware of options that could help your business turnaround if in distress?
Tax minimisation
Minimising the impact of tax
Is your business tax-effectively structured to achieve the best after-tax sale value?
It is a question many business owners are asked – and with good reason. The tax consequences of a business sale are crucial.
When a domestic business is sold, the tax impost can be as high as 47%, potentially higher if there are international components to the sale.
This underlines the need for careful planning and execution. Our team has guided many business sales with a tax rate significantly lower than 47% of the gain and, in some instances, little or no tax payable on the gain.
It makes after-tax sale proceeds a crucial piece of the exit planning puzzle.
This is especially true where the sale proceeds are used for a specific purpose, such as funding a comfortable retirement, and a required net amount of funds will be needed to achieve the owner’s particular goal.
Tax-effective business structuring for an exit
Our survey reinforces that the number one concern for business owners is to achieve the desired sale price. Yet, more than half (51.3%) of our respondents are unsure if their business is tax-effectively structured for a sale.
This raises questions about how owners can plan for the after-tax proceeds they are likely to receive.
Importantly, it begs the question, if the after-tax proceeds do not leave business owners with sufficient funds to buy the assets or fund the lifestyle they are envisaging, is it too early to sell?
Conversely, if the after-tax proceeds will be more than enough for the owner’s needs, could they sell and transition to a new life phase sooner?
It is an area where investing in expert advice can be the difference between maximising returns on exit or losing a substantial sum to tax.
“Given the significant impact that tax can have on business sale outcomes, considering the after-tax sale proceeds is crucial. This is especially important when the amount is needed for a specific goal, such as to support your retirement.”
Todd Want Head of Tax
Retirement planning
Can your business fund your retirement?
Running a business can be personally and professionally rewarding. But these benefits can come at a cost.
It is well-documented that across Australia’s SME community, superannuation savings tend to be low. A report by industry body, the Association of Superannuation Funds of Australia5 (ASFA) found 21.6% of self-employed people have zero super. A further 45% have low levels of superannuation savings.
This being the case, it is not surprising that our survey finds over 40% of Australia’s business owners don’t believe they will have enough money to fund their retirement lifestyle.
In addition, approximately 70% of business owners do not have an effective exit plan in place to extract maximum value from their enterprise.
Yet, close to one in two (48%) of our respondents point to retirement as being the likely factor to trigger an exit. This suggests many SME owners are pinning their hopes on the sale proceeds of their enterprise to fund their retirement.
The reality, however, is that there is a difference between success in business, and successfully growing personal wealth. At William Buck, we have often seen business owners grow wealth within their enterprise, while failing to translate this success to personal wealth following an exit from the business.
https://www.superannuation.asn.au/wp-content/uploads/2023/09/Super-and-the-Self-Employed-May2016.pdf 5
Retirement planning (cont’d)
Maximise your personal wealth through appropriate structuring
First, it’s important to understand the risks your business faces, and take steps to mitigate these where possible. Through appropriate structuring, you can enjoy protection against much of the impact of any unexpected events on your personal wealth.
It can also be worth aligning superannuation interests with business interests. This may mean buying your own premises, for instance, to become your own landlord, and give you the opportunity to control the destiny of your business.
But ultimately, business owners need to look at the broad picture. Personal wealth is all about consistently harvesting profits, minimising tax and taking a long-term approach. Relying solely on the value of a business for retirement is a high-risk strategy. Market conditions and the expected profits on sale need to be maximised to provide appropriate funding – and this may not always happen when the time comes.
This reinforces the importance of business owners reviewing how their personal wealth is structured in the approach to retirement. A number of strategies can prove valuable here such as turning non-deductible debt into deductible debt to pay down the balances more quickly.
It also explains why business owners can benefit significantly from designing a wealth accumulation strategy to build investments and generate passive income– we like to think of it as ‘beach money’ –that can supplement income from the business, and eventually replace business income as the main source of lifestyle funding in the future.
Business owners who have their wealth appropriately structured, including being able to access tax concessions that limit the outflow to tax on the sale of their enterprise, can have their cake and eat it too –reaping the rewards from their business, and enjoying a quality retirement. It’s a salient message for the more than 60% of business owners who say they do not have a tax effective structure in place.
“Preparing to exit your business is often a trigger to consider how your retirement is going to be funded, however this is usually too late to maximise your position.”
Scott Girdlestone Head of Wealth Advisory
Have you considered whether your postsale lifestyle is adequately funded?
Contact
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William Buck Exit Smart Report