Business owners must weigh up the true value of their practices and focus on achieving higher multiples, according to GRG Momentum founder Geoff Green.

“The key question an owner needs to ask is, what is my business actually worth and how quickly could I sell it?” he told a Melbourne workshop last week attended exclusively by insuranceNEWS.com.au. “There are people out there who want to pay a realistic price and act quickly. If the owner can’t answer those questions, they will miss the sale.”

The consultant says most owners do not know the value of their business and cannot sell quickly. But making the business sellable is the ultimate goal for the owner.

“It is about building the business and the exit,” Mr Green said. “A good exit is walking away, being financially secure and looking for new opportunities to pursue.”

He says many business owners who sell up then feel at a loss, not knowing what to do next.

“I don’t see business exits as the end of a career,” he said. “It is taking you to the next level.”

The next decade will bring a surge in Baby Boomer owners retiring from their practices.

“As they sell their businesses, this is going to have a huge impact,” Mr Green said.

“They own 70% of private business and $1 trillion of business value will be transferred in the next 10-15 years. There is a real lack of awareness of this issue.”

He says the flow of business exits is hard to predict, but looking at accountants, the average age in the profession is 52.5 years.

“What will happen when they want to leave? There could be a lot of businesses coming onto the market in the next 10 years and they will face the problem of finding a buyer.”

Mr Green suspects there will be more management buyouts, because younger people want to start their own businesses rather than buy an old practice.

“It will be supply and demand, meaning a buyers’ market. I suspect some business owners will just close the door rather than try to find a buyer.”

He says many owners do not understand how long it takes to sell a business; preparation to become “sale-ready” can take more than a year, and owners may be required to work on for a number of years under the sale terms.