Creating a plan for your exit strategy

Exiting your business is a big commitment. You’re leaving behind everything you’ve built up, so it’s vital that you have a plan of action and a clear route to your end goal. This means sitting down with your advisers to create a long-term exit strategy, with a plan that's aligned to your key goals, aims and financial commitments as the owner.

Coming up with this plan won’t happen overnight. A business sale is a complex process with many different elements that all have to be considered. A workable plan, will give you a helpful route map to guide you along the way.

Here are some of the fundamental things to think about when writing your plan.

Know your sale price

As the vendor, you need to come up with an asking price for the business. Your sale price isn’t just driven by market forces. It’s also dependent on how much money you need to raise.

If your aim is to start a new business, think about how much capital will be needed to get this idea off the ground. If your goal is to retire, you need to work out the size of the lump sum that will be needed. You could live for 20 or 30 years post-retirement, so any cash raised has to provide you with your desired income and lifestyle for a number of years. Don't forget to allow for any tax that may be payable on profits you’ve made. We can help you estimate that.

Work out what funds you will need to retire or invest and make this total cost the benchmark for your ideal sale price. If you’d need 10Mill over 20 years, you know that your asking price must leave you with more than that after tax to provide a cushion for your finances.

Get the business valued

The next step is to understand the value of the business on the open market. This means talking to your accountant who may advise you to talk to a M&A (mergers and acquisitions) expert.

Value is a complex measurement. It can be influenced by your brand’s reputation, the business’ current financial health, the worth of your company assets or the skill of your existing team. A change in any of these elements can have a huge impact on your sale value – and, as a result, the size of the profit that you and your departing shareholders will make from the sale.

If your current value is projected as 8 million, but your initial asking price must be 10 million or more, there’s some work to do to add this value and boost your final sale price.

Decide on a successor

Every business needs a safe pair of hands at the top. Thinking about who will take over the reins, and how to make this transition run smoothly, is a vital part of your exit strategy.

A succession plan explains your own plans for retirement, who will take over your role and the timescales for this succession process. It may be that a family member is your intended successor. It could be that your intended buyer will take on the owner-manager role. Or it could be that a current member of your executive team is ready and willing to step into your shoes. Make sure you’re clear about who the new boss will be, and how (and when) this person will succeed you as the leader of the business.

Work out the timescales for selling up

Selling your business is rarely something that happens quickly. Preparing for a sale can often begin years before the proposed date of exit, so it’s important to be clear about your exit strategy and the key dates along the main timeline.

A five-year exit strategy is common, and you should allow at least two years to complete the process from beginning to end. Selling up may seem like the final scene in your business play, but in fact it’s only the beginning of a long and protracted final act. The more you can do to plan each step of the exit, the more successful your final sale will be.

If you think now is the time to start planning your exit, please do get in touch with us. We can help you value your business, work out your benchmark sale price and achieve the best possible sales price.

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GST changes for online marketplaces and apps

25 Apr, 2024

From 1 April 2024 “Electronic Marketplace” transactions will be subject to GST in New Zealand, even if the person delivering the service, is not GST registered. This legislation was passed in 2023, and although National campaigned on repealing this law if they got into power, they confirmed in December 2023 that they will now leave the legislation in place. The new legislation covers more than just properties, it also covers Uber and Uber Eats, for example. But we are just focusing on the property implications and what it means if you own or rent out a room, bach, or an investment property. If you have booked a property for a work or family trip any time after 1 April 2024, you should also continue reading, as there are possibly implications for you too. So, what does the law say? That platforms like Airbnb, Booking.com, Expedia, Vrbo etc. are required to charge GST on all transactions and pay this GST over to Inland Revenue (IRD) where the owner of the property is: GST registered: Pay 15% to IRD. Report your income as zero-rated on your GST return. This ensures the income is declared and you do not pay the GST twice. It also means that you claim your GST on expenses, and will likely receive refunds each GST return. NOT GST registered: Pay 6.5% of the GST to IRD and pay the remaining 8.5% to the property owner. If you are not registered for GST there is nothing for you to do. You only qualify for an exemption if: your income from these activities is over $500,000 per year: or you had more than 2,000 nights booked in a year. This means that all these platforms are frantically updating their software to allow for the collection and payment of GST to IRD. Here’s what we do know: Expedia : They have NOT been able to update their software and will be removing ALL NZ listed properties from 1 April 2024, unless you qualify for the exemption above. If you have a property listed on Expedia, they possibly may remove it. There is no clear guidance as to what happens if you have bookings for the future but we suggest you contact your guests. Be careful how you do this though, as it’s against Expedia’s rules to make contact with guests outside of their system. If you are travelling and made a booking on Expedia, you may also have an issue - contact your host to work out what to do. Vrbo (ex Bookabach): While owned by Expedia, they have upgraded their software and will be able to cope with the new GST. But be aware, from 1 April they will automatically add 15% GST to all bookings. So, this will increase your nightly rate by 15% and make your property more expensive. You will have to manually update your rates to reflect this change. Airbnb: They, too, have decided they will add 15% GST to every booking from 1 April 2024. Their system says they are not yet set up to deal with NZ GST. Booking.com: They have not yet provided guidance on what they are planning to do. Will they be like Expedia and just stop supporting NZ properties or will they be like Airbnb and just add 15% to all bookings? So, a warning, if you are not GST registered, and you have not told your platform provider, it appears they will default to adding 15% GST to your property and pay this 15% to IRD. How you get your 8.5% back remains a mystery. If you are planning on booking accommodation, be wary of using Expedia or Booking.com, as a booking after 1 April 2024 could potentially cost you 15% more! In any event, landlords and holiday makers should revert to their booking platform for the latest information and policies. If you want to know more please reach out to us.

Five ways for better business efficiency

23 Apr, 2024

Everyone likes efficiency, the more efficient something is, the better - right? Especially with the economic climate still needing some work. If you’re wanting to save some time (and money), making your business processes more efficient is a good place to start. It also means that you can put more time into working ON your business, rather than in it. Here are five ways you can make your business a little more efficient. Better invoicing This sounds obvious, but the more efficient you are at invoicing, the less time you spend on it and the more time you save. And time is money. Develop a process that makes this more efficient – which is something that can vary by industry. Think about whether you can set up recurring invoices or have your staff invoice for the job on completion. Where can you reduce the headache of invoicing and make it more efficient? Streamline expense claims Develop a digital solution for your expense claims process. This way your team can submit their receipts and approve expenses online – which reduces mistakes, and not having everything you need to approve the expense. Utilise online/digital software Almost everything has a digital version, so it’s time to utilise it so you have business data wherever you are. No more going back to the office to check a number, getting back to clients with final details, or reworking quotes because the numbers were wrong. If it’s all available at your fingertips, this drives efficiency. Maintain lean(er) stock levels If your business sells inventory, lean inventory management could help you reduce unwanted costs, and become more efficient. The idea is you only produce or order in the stock you actually need. By optimising inventory levels, you can reduce carrying costs and align supply with customer demand, which means you won’t be falling over, or holding space for, excess stock. Review your overheads Another component of business efficiency is keeping costs down – like overheads. Have you checked if the costs from your suppliers, like rent, bills, and transport, are needed? Have you also looked for ways to reduce these costs?Consider whether you can achieve the same outcome for lower costs? Could alternative suppliers provide a quality service at lower cost? Are office supplies being stockpiled from habit rather than need? If you need tailored advice on how you can make your business model more efficient, get in touch with us.

How to write a recruitment advertisement that stands out

18 Apr, 2024

Finding the right staff for your business can be tough. Hiring can be challenging, but the right team can really support the growth of your business. Attracting the right staff starts with writing a recruitment ad that makes your role stand out in the crowd. Here are three ways you can make your job ad more appealing: Sell the role Rather than beginning the ad with the job description or a list of requirements, start with what makes the job most appealing. Is it the industry, location, pay, or perks? Be up front with the advantages so that it’ll grab people’s attention and encourage them to read further. Keep it short and sweet While it can be tempting to write a novel so that it paints your business in the best light, it’s better to keep your job ad short and sweet. Aim for a maximum of 700 words that are straightforward with readable language, and avoid adding unnecessary words or repetition. Avoid meaningless clichés Every job ad mentions their amazing team, or how the environment is fast paced. Everyone says they’re offering a ‘competitive salary’. All jobs are looking for self-starter’s or those who can hit the ground running. Rather than using the same phrases as everyone else, be different. What can you write that makes your business stand out from the crowd – you could provide the actual salary, for instance. Describe the job, the team, and the environment clearly and accurately. This helps the candidate get a genuine understanding of the role and that’s what piques their interest – not the same phrases that everyone else is using. Hiring Now that you’ve attracted the right person for your team, make sure you cover your bases when hiring (especially around trial periods). If you need help with employment contracts or other employment-related questions, let us know we’re here to help.