Wasted Years: Kiwi Business Owners Retire With Nothing To Show

Up to half of Kiwi businesses—between 40 and 50 per cent—that go up for sale fail to find a buyer because of poor preparation, and the number may even be higher because a significant percentage of business owners shut the door and walk away, often from a lifetime of labour.

Bruce Cattell, CEO of New Zealand’s biggest business sales firm, Link Business Brokers, says the main culprit is that business owners get so caught up in doing the day-to-day that they fail to prepare for the future.

“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.

“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.”

Cattell says preparing a business for sale, even five or ten years out, is likely to limit the chances of burnout and make the whole job of being a business owner easier and more pleasant.

He says that the so-called deluge of baby boomers rushing to sell has failed to materialise and can best be described as a trickle. One reason for this is that many of them are simply shutting the door and walking away.

“It’s a tremendous cost to the economy and the prosperity of Kiwis.”

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Cattell says business buyers are risk-averse, particularly in today’s environment where finance is not readily available. While there are more prospective buyers this year than in previous years, they are also more cautious.

“Younger people largely buy businesses and older people sell them, but young buyers today have less access to homeownership or other assets, so they are approaching the sale with more wariness than in the past—they want certainty.”

He says by far and away the most important criterion for a buyer is as much certainty as possible around future earnings.

“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.”

“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.”

How to turn your business into an asset

Cattell says that those Kiwis who want to turn their business into an asset they can sell later one should implement the following factors:

1. 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.

2. 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.”

3. 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 onecustomer—that’s dangerous,” Cattell says.

4. 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.

ABOUT

Link Group International, founded more than 27 years ago, specialises in connecting business owners with buyers globally. With 23 offices across New Zealand, Australia, and the USA, its extensive network includes over 200 specialist Business Brokers. The company maintains a robust database of over 250,000 active buyers, ensuring it meets diverse client needs effectively and efficiently.

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