We’re thinking about whether it’s time to sell the business. Who would we sell to, and for how much. W’re not in a rush, but it’s time to get prepared. Wondering how best to go about doing this.
Thoughts of the Day: When you sell the business, knowing what you need to get is different from what you can get. Optimal buyers don’t just show up. If you’re running out of time, make the best deal that you can.
Every business owner will someday give up ownership or sell the business.
Most business owners confronting the reality that it may soon be time to sell describe it as shifting gears on a fast-moving vehicle – rough. But they have no choice because ignoring the problem turns to even worse consequences including closing the doors with nothing left to show for years of hard work. So how do you create an exit strategy for your small business?
3 questions to start working on, the first being, “What’s the business worth?”
Get a realistic valuation of the business from someone who is qualified to give an accurate answer. We’ve seen lots of owners blow up sales with unrealistic expectations after getting inappropriate information from advisors who are catering to the owners’ egos. Get guidance from people who have seen hundreds or thousands of valuations, with credentials that mean they’re a valuation expert, who can document that they have worked a broad portfolio of businesses through to successful transitions.
The second question to address is “How much more could we get for the business?”
Consider the effort people go through when preparing a house for sale – cleaning up and polishing, staging the furniture, clearing out the clutter. Many business owners hire specialists to work through the process of preparing for an optimal transition. An unprepared business is worth way less than one that’s ready to continue successfully under a new owner.
The next big question is, “What will I do next?”
It’s hard to go forward while looking in the rearview mirror. Many business owners find they’ve been running this business for so long, they can’t imagine doing anything else. Start exploring future opportunities and create a positive vision of what comes next.
“Would anyone else want or value this business the way we do?” is a question on the minds of many sellers. It’s the wrong question. Instead, shift to asking, “Who would be willing and able to make something better of the foundation we’ve created?”
Hoping that an optimal buyer will just show up is foolish. It takes an active research and marketing campaign to find and woo optimal buyers. Most business owners have spent their lives seeking out good prospects and convincing them to do business. Think of exiting the business as one more sales job, albeit one that takes more, and different, planning and preparation.
Identify the business’ strengths and look for buyers who want exactly that. Get sales and marketing people to promote the business to a target list. Have a solid financial and operations picture prepared so you can show clearly what the business is doing.
Consider insiders, employees, as well as outsiders. After all, employees often have the highest vested interest in keeping the business going. Prepare them for the challenges of owning, in addition to managing, the business, so they’re ready to step up with its time to do so.
It takes years to prepare the business for a high-value transaction; if you don’t have years, figure out how else to close the gap between what you need and what you can realistically get from the business. Consider signing on as an employee post-sale. Create additional value because you’re willing and able to shepherd a successful transition, manage top accounts, ensure optimum production and profit levels are achieved.
Looking for a good book?
Try: “The Complete Guide to Selling a Business’ by Fred S. Steingold.
