By Scott Patterson

I think we would all agree that the last few years in business have been challenging to say the least. Having survived this period, how do we make our businesses stronger, more resilient and more valuable? We cannot change the past, all we can do is assess where we are right now and work to make things better in the future. Take a moment to ask yourself a few important questions in relation to your business:

1. What are the key challenges (both good and bad) that we will face in 2013?
2. If we had a magic wand and no limitations, what could we do differently to build our businesses in 2013?

These questions may take some time to answer. We need to think beyond our last BAS or tax return or a recent comment by one of our staff or customers. Really have a good look at the business and see what comes to mind.

Do there never seem to be enough hours in the day? That is, are you so busy dealing with the day to day issues and problems that you just don’t have the time to consider the overall direction of your business?

Are your staffing systems adequate and up to date? Are your key staff members incentivised to help you grow your business? Do you conduct regular staff reviews for all your team members? Are you compliant with all the necessary workplace health and safety laws?

Do you have a clear sense of direction in terms of where you want to take the business or is it a case of “business as usual”? Without a clear sense of direction we tend to be very reactionary and not necessarily proactive. That is, we deal with and react to the every day problems that arise but don’t have an overall plan that guides our decision making.

If you do have clear goals, do you know how to get there?

Do you know what your business is actually worth? Do you know what you would like it to be worth and what you need to do to improve its value? The following example helps to add perspective to these questions:

“David” (53) is the owner/operator of a successful business providing support services to the building and construction industry. David had started thinking about finishing work and believed all it would take is not getting out of bed to go to work. Until he spoke to us, David was looking forward to retirement. He was planning to sell his business to fund part of his retirement. He didn’t realise how the shortfall in his business value affected his future lifestyle.

Based on his retirement plans, David worked out that he would need $1.25 million in retirement assets at age 60. His projected income earning retirement assets were $575,000. His asset shortfall of $650,000 far exceeds the current value of his business.

If David did nothing he would face: • Accepting a lower standard of living at retirement • Continuing to work well past his retirement date.

This case study highlights how the value of a business affects an owner’s future standard of living and how succession planning can be used to grow and realise business wealth to fund the shortfall.

Live cheap or die young! Are these your only two options in retirement?

We conducted a Value Gap Analysis for David, which determined he needed to grow his business profit by $50,000 per annum so he could afford to retire. Once he had identified his future profit target he implemented procedures to grow income and improve job profitability. David’s growth strategies included purchasing a new job costing system to accurately record job income and expenses. He also segmented his clients to focus on more profitable work and has identified some niche marketing opportunities. He has fewer clients but is making more money.

David’s succession strategies included joining a network of similar businesses to share training and professional development costs and selected administration functions. Sharing costs and functions with similar businesses is one way of retaining control but identifying “like minded” business owners. One or more of these businesses may even be the future buyers of his business.

So, when you have thought about those two very important questions and the answers that flow from them, please contact our office to discuss how you can make 2013 count.