FAMILY business owners expecting to turn a quick profit and fund their retirement through a trade sale may be in for a rude shock, according to the Survey of Family Business Needs 2006 launched recently by KPMG, Family Business Australia and Deakin University. Family Business Australia says the number of business owners who intend to sell their business on the open market as an exit strategy has more than doubled, from 16 per cent in 2004-05 to 38 per cent in 2005-06. There is a disproportionate number of people between 45 and 65 years old (24 per cent of the Australian population) compared with the number of people in the potential buyers category 35-45 years old (15 per cent of the population). KPMG said this demographic mismatch meant that only truly profitable or professional family businesses would attract premium pricing with the prospect that the also-rans would be difficult to sell. Just as a company needs to make itself as attractive as possible before going to an initial public offering, family business-owners who are looking for buyers also need to get their house in order, a KPMG spokesman said. The survey shows that business-owners are spending long hours in their businesses. After they’ve worked so hard, it seems a waste not to extract the maximum value they can when they retire. Business planning is essential not just for the smooth operation of the enterprise but also for convincing potential buyers of the value of your business. The survey found that one quarter had no strategic business plan and 40 per cent did not have a functional plan for finance. Almost half were lacking a functional operations plan. Without a robust business infrastructure in place, those looking to either pass on or sell off their business may find it more difficult than they thought and in some cases may be cheating themselves out of their retirement. Survey highlights •73 per cent of respondents spent 40-69 hours working in the business a week. •26 per cent of respondents plan to retire in less than five years, 35 per cent within the next five to 10 years. •62 per cent of family businesses surveyed had not chosen a successor. •Family businesses rated increasing profits as their number one business challenge, followed by business growth and then increasing customer base/sales/ turnover. •Respondents ranked international competition as their lowest concern in terms of business challenges. •Balancing short-term and long-term business decisions remained the number one issue for family businesses, followed by maintaining loyalty of non-family members, and determining the financial value of the business. •Finding an outside buyer for the business was considered by respondents to be of the least concern in terms of business issues despite 38 per cent of respondents indicating that they plan to sell their business on the open market. In terms of performance evaluation, 92 per cent evaluated their financial performance, 76 per cent their manufacturing/ operational performance, and 73 per cent their customer feedback. Only 35 per cent evaluated their environmental performance. Estate planning proved to be the most popular family-to-business mechanism with 72 per cent employing wills for senior members who have a stake in the business. Only 17 per cent employed a family constitution as a family-to-business mechanism.