Reseller makeover: Aquatech

Engineering firm and software developer Aquatech Consulting had made a successful business selling irrigation software to private farmers.

The small company - three engineers and two technicians - had created a useful product that had potential. Its WaterTrack Optimiser program had been noticed by Austrade, which was keen to promote it internationally.

The owner, Jim Purcell, 55, who had run the business for 10 years and worked in the industry for 23, realised one day he needed an exit plan.

Purcell turned to Peter Scolari of Scolari Comerford, who suggested a valuation model called Bstar that had been designed by a company in Queensland.

The Bstar process begins with a series of questionnaires intended to understand the business, its financials and the current and prospective owners' aspirations.

Purcell and his wife spent a day with Scolari and a Bstar representative to discuss Purcell's ambitions, Aquatech's strengths and weaknesses - "what you think makes the business tick", says Purcell.

Then senior engineer Antony Fairfull and his wife went through the same process to discover his ambitions for Aquatech as its prospective owner.

"There's a lot of time spent trying to understand the business from both sides. The senior engineer and myself found that process very good," says Purcell.

Both parties compared and discussed their results, and directors' agreements were drawn up covering issues like a director's retirement, direction of the business, investment and division control. The agreements also helped Scolari determine a multiplier for the business' profit and calculate a valuation.

"We're analytical people as engineers, I guess, but there certainly seemed to be a lot of logical processes we went through to come up with the valuation. Neither one of us had any problem with the valuation at the end of the day, mainly because it wasn't something that someone pulled out of their left pocket."

A succession plan should be considered within the first two to three years of starting up a business, says Scolari. Succession planning can form part of a company's expansion plans, depending on the owner's ambition.