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Richard Rasmussen kicks off his top 10 tips for selling print businesses

Tuesday, 10 April 2012
By Print 21 Online Article

Ascent Partners principal, Richard Rasmussen, offers the first of his Top 10 Tips to get the best value in the sale of your printing business. Some may recall he offered these tips back in the middle of the GFC. It’s interesting to see what’s changed in the business sales landscape since then, and what remains the same.

Tip 1 – Start the planning process early.

Most printing businesses don’t have an exit strategy. They rely on happenstance and don’t really have a plan.

As you would expect in my business, I keep a record of those considering selling. Many ask me what their business is worth, and what the market is like for business sales. More often than not, they put that information in their memory bank and say “keep in touch, maybe in a few years”. And they keep on trading, rarely really changing much about the way they plan to exit.

Perhaps the hope is that things will improve, and the business value will grow.
But, at that point, they really should be putting a plan in place to work out how they need to exit, what they need to do to prepare to exit, and when they want to exit. But all too often it’s left to happenstance. No plan is put in place; no real structural changes to the business are made.

The reality is that what tips most proprietors into sales mode is an “event”, not carefully exit planning.

Common events include an illness, a major client leaving, a key staff member leaving, a lease renewal, or your sibling deciding they do not want to take over the business. In today’s tough print environment it’s now unfortunately also the call by the creditors forcing the sale / liquidation or the fact that your spouse does not want to tip any more money into the business.

The problem with the “event” sale is that it is ad hoc / relatively unplanned. It does not prepare the business for sale to be at the point where:

  • It is at the proprietor’s timing
  • It will reap the best “walk away” return
  • It is most attractive to a purchaser
  • The proprietor can walk away on their terms

The aim should be to find the right person that values your clients, premises, equipment, systems, IP, brand and staff when you’re ready. Take away any of these components and it is likely your value will be diminished. And that’s the problem with ad hoc sales – the business is not ready for sale. One or more of these components are not ready and the result is that the proprietor misses out. The deal on the table is not what they need / expected and doesn’t address their personal exiting objectives.

Early exit planning, say four years out, forces proprietors to focus on what they need to do to provide them with the greatest equity (walk away dollars), and what will allow them to fulfil their personal objectives, such as phasing out of the business over time.

There are some questions that need to be asked, and decisions to be made:

  • Will I renew my building lease?
  • Will I replace employees when they leave?
  • Should I be investing in new technology or should I outsource that component?
  • How can I minimise capital gains tax?
  • Do I really want to retire, or could I work a few days a week?
  • Should I change my business model?
  • How do I retain and grow my customers?
  • What will I do, to help the in the transition phase of the sale, and post transition?

The best selling price shouldn’t be the primary target – as far as price is concerned, the best walk away dollars should be, and that is not just at the point of sale, it is also in the build up to the sale – over the next four years. And, maybe post the sale, working with the acquirer.

For example would you prefer to get $1,000,000 for the business, with net liabilities that you need to pay out from this amount of $600,000, or would you prefer to get $800,000 for the business with net liabilities of $250,000?

Common liabilities you need to pay out at time of sale are staff entitlements, equipment and business loans and the ATO (GST / capital gains). Perhaps the greatest of all these liabilities is the equipment loans. Unfortunately with the falling values of equipment, many will be surprised to find they have negative equity in some equipment. This provides another good reason to plan and research before the sale decision.

The exit planning process should include your accountant, although they are not the ones to advise you on your machinery values (machinery value does not equal written down value or pay out value), nor are the best ones to appraise your business’s value – how would they know what printing businesses sell for? Unfortunately, most of the time they rely solely on accounting formulas and the equipment book values.

This leads to the most important point about starting the planning process early:

Get your business appraised early

Don’t wait for the “event”, and, as a consequence, being forced into a sale at a price you may be very surprised by (more often than not disappointed by). It’s better to find out what the business is worth now, even if you are not planning to sell for a few years.

As part of the appraisal, get the appraiser to break down the two components of this value into plant and equipment value and goodwill, and ask them to provide a rationale / evidence as to how they arrived at those figures.

This rationale helps in the decisions you subsequently make in the lead up to exit. It provides a starting point to plan. Without it, you’re really only working on gut feel, and when it comes time to sell, you’re really hoping on a figure, rather than having a realistic idea of what that figure may be.

Richard Rasmussen is the principal of Ascent Partners, a business that, within the Australian / NZ printing industry, offers Business Appraisals, Business Sales and Business Consultancy services. He can be contacted via the web site, or via phone – 1300 887 648 / 0402 021 101.

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