is there a demographic time bomb in your client base?

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Is there a demographic time bomb in your client base?

Business Valuation

Value Gap Analysis

Succession Planning for

your Clients

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1. How do I value my business?

2. What is my value gap?

3. How do baby boomer clients affect my

business value, profit and succession?

Agenda

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• Sole practitioners are baby boomers

• Most sole practitioners are unprepared

• Valuations and funding are integral components

of succession planning

• Previously a sound method to determine the

profit multiple has not existed

• Understatement of value could be catastrophic

for your retirement lifestyle

Succession PlanningA major strategic event

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• New on-line technology is providing for fast,

accurate and cost effective valuations

• Determines the profit multiple when valuing

a business

Business Valuations

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Case Study - Part A

What is my business value?

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Business Valuation

Sell business

Be in position to retire within 5 years

$175KGross remuneration

Succession Plan

57Age of owner

Personal

100%Ownership

$75KWA NEBIT (15%)

$500KIncome

Business

Current business value?

Planning Outcomes

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1. Profit

2. Free Cash Flow Factor

3. Cost of Funds

4. Indicative Tax Rate

5. Investment Payback Term

5 Inputs

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Case Study - Part B

Can I afford to sell?

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1. Business value needed at sale?

2. Period before you can afford to sell?

3. Fee and profit target?

4. Growth strategies?

Value Gap Analysis

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Value Gap

$175KProj. debt (personal/business)

Sell business$620KProj. invest assets (excl. home)

Be in position to retire within 5 years

Succession Plan

$85KDesired retirement income

Personal

Future fee income, profit and business value

Protect and grow fee income

Planning Outcomes

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• Plan well in advance

• Take the time to document a plan

• Be in control, don’t have your choice imposed

upon you

• Manage your value drivers

Wake Up CallWhat you need to do

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How can I close my value gap?

Protecting, growing and realising value

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• Not reliant on the owner

• Good systems

• Quality clients

• Loyal and committed staff

• Innovative and different

• Benchmark performance

• Succession planning

Value Drivers

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• Agree segmentation strategy

• Determine segmentation criteria

o Preliminary - Top 5 Clients & Fees

o Advanced - Quantitative and Qualitative

• Run segment report

• Identify client risk and opportunities for growth

Client SegmentationRisk or opportunity?

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• Calculate your average fee

• Multiply your average fee by segmentation

multiplier

• Prepare list of clients per fee category

• Calculate your client sensitivity risk

PreliminarySegmenting by fees

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Growth Options

Fin

ancia

l Services

Acquisition

IT

Clien

t Su

ccessio

n P

lann

ing

Advisory

Client List

Merger

Plan

Growth

© Bstar Pty Ltd 2007

• Protecting fees

• New income

• Next generation of clients builds long-term

value

Client Succession PlanningSecuring your future

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Client Succession Planning

A systemised approach

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Engaging your clients

Retain ClientsBuild Firm Value

Sell when you want to

SegmentClients

AgeBusiness Value

StaffFees

ImplementEducationProgram

Capture Client’s attention with a

mix of active and passive marketing

Surveys and Worksheets, Articles, Case Studies and Newsletters

Step your clientthrough

Advice Model

ConfirmDemand

Integrate intoservices model

© Bstar Pty Ltd 2007

© Bstar Pty Ltd 2007

Peace of Mind

Having an end game

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Value Gap Comparison

Current

Business income $500K

5 years

Business profit (15%)

Business value

Business value needed

Value shortfall

$75K

$772K

($434K)

$338K

Business income

Desired profit target 43.9%

$K

Business profit (%) $K

Business value $K

Business value needed $K

Value shortfall($K)

Desired profit target 82%

How long before you can sell 17 yrsHow long before you can sell

3

© Bstar Pty Ltd 2007

• Searle Sessarago & Partners

“Our Value Gap has reduced by close to $1M

over the last 12 months”

Working on not in the business

© Bstar Pty Ltd 2007

• Complete a Guide to Effective Succession Planning

o Cost $275

• Calculate your value gap analysis on-line

o On-line ($275) or consultation $660

• Value your business

o Cost $990

• Offer succession planning services to your clients

o Become an alliance partner

o Outsource to Bstar

Take Control!

© Bstar Pty Ltd 2007

Thankyou

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