Futureproofing your business: why half of Kiwi businesses go up for sale

July 25, 2024

Bruce Cattell, CEO of New Zealand’s biggest business sales firm, Link Business Brokers says that nearly half of Kiwi businesses go up for sale because of poor future preparation.

Cattell says that this statistic may actually be higher because a significant percentage of business owners shut the door and walk away, often from a lifetime of labour.

The main reason? Many businesses are not preparing themselves for the future.

Kiwi business owners are often so caught up in the day-to-day admin that the futureproofing is left on the backburner.

“Sometimes a business owner is forced to sell because of a medical event, for example, and they find themselves with nothing to show for it. In fact, it is not uncommon to find business owners who are exhausted or burnt out and over it all. They just want out,” says Cattell.

“Closing the door and walking away is a sad outcome for years of blood, sweat and tears, but in some cases, it’s inevitable because, in part, we Kiwis get too caught up in the nuts and bolts; it gives us a sense of satisfaction and certainty.”

And closing down a business is a “tremendous cost to the economic and prosperity of Kiwis” as there are fewer prospective buyers than previous years due to the risk.

When it comes to running businesses, Cattell says it is important to prepare your business for sale even five or 10 years out.

This could help with limiting the chances of burnout and make the whole job of being a business owner easier and more pleasant.

“To achieve this, business owners need to ensure that the business is not dependent on one or two customers, and the same applies to its suppliers because of the ‘eggs all in one basket’ factor,” he says.

“Buyers place a high value on historical, consistent profitability as an indicator of what could happen going forward. An idea for a business owner is to create a milestones map that shows where the business came from, where it is, and where it is going.”

These are Cattell’s five steps in turn your business into an asset:

Have good accounts

Be a good bookkeeper and stop stealing from yourself. So-called cash jobs are not only illegal, they undermine the value of the business.

Develop good processes and systems

Systems and processes not only reduce costs and improve efficiencies, but they also reduce the company’s dependence on the owner.

“Delegating more responsibility to staff is also a way to make the business less dependent on you.”

Diversify your customer and supplier base

If your sole supplier hears you are selling, they may want to revisit their agreement with you.

“I have seen sales fall over because the business had only one supplier, including one that had been doing business with a single supplier for 30 years.

“Having just one or two customers is an even bigger risk to you and a future buyer. The business will be difficult to sell. Having just one or two customers is an even bigger risk to you and a future buyer because the business will be difficult to sell. One business we worked with was getting 80 per cent of its earnings from one customer—that’s dangerous,” Cattell says.

Build a solid brand

Brand strength and reputation are important factors in business sales because they add tangible value to the business. A good brand reputation endures and can be passed from owner to owner.

“Most important is to be profitable and have good accounts,” Cattell says.