Is there a demographic time bomb in your client base?

© Bstar Pty Ltd 2007

Is there a demographic time bomb in your client base?

Business Valuation

Value Gap Analysis

Succession Planning for

your Clients


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


• 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


• New on-line technology is providing for fast,

accurate and cost effective valuations

• Determines the profit multiple when valuing

a business

Business Valuations


Case Study - Part A

What is my business value?


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


1. Profit

2. Free Cash Flow Factor

3. Cost of Funds

4. Indicative Tax Rate

5. Investment Payback Term

5 Inputs


Case Study - Part B

Can I afford to sell?


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


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


• 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


How can I close my value gap?

Protecting, growing and realising value


• Not reliant on the owner

• Good systems

• Quality clients

• Loyal and committed staff

• Innovative and different

• Benchmark performance

• Succession planning

Value Drivers


• 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?


• 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


Growth Options

Fin

ancia

l Services

Acquisition

IT

Clien

t Su

ccessio

n P

lann

ing

Advisory

Client List

Merger

Plan

Growth


• Protecting fees

• New income

• Next generation of clients builds long-term

value

Client Succession PlanningSecuring your future


Client Succession Planning

A systemised approach


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



Peace of Mind

Having an end game


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


• Searle Sessarago & Partners

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

over the last 12 months”

Working on not in the business


• 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!


Thankyou

<Insert contact details>

Documents

Is there a demographic time bomb in your client base?