Raise your hand if you know of someone who owned a business and closed it down for one reason or another. This happens much too often. Research suggests 4 out of every 10 businesses ends up closing down rather than selling.
As a business broker
, and more importantly, as a former small business owner who grew several small businesses and sold them this is how you are going to do it!
Lesson #1 - develop a business plan – a roadmap telling you where you are going – perhaps I should say GPS system to be current – but in any case a layed out plan for where you are going – that system needs to be given a destination - an exit – letting you know where and when to get off.
There can be great variables in each step. So, it is key that you start as early as possible if you want to exit successfully.
Companies with a plan learn that there is a timeline for the business and a timeline for the sale. Thinking about your exit strategy from the very beginning will maximize your value regardless of the business conditions at the time of sale
Lesson #2 - plan for the process to take time. You will need 3 years of P&Ls and tax returns for potential buyers. Some business owners treat their companies like an ATM machine. Taking out cash anytime, any place for anything. If your books don’t look like they support your business a buyer sees a red flag. The financials can be recast to show the true income and expenses, but this doesn’t help you make the case for your price. So keep clean books.
Even when a buyer is found it takes time for the terms to be negotiated.
Some times this can go quickly if the seller wants to change careers/retire and/or move on and the buyer wants to completely takeover. But if employee contracts, seller finance, non-competes and many other variables are in question this can take more time.You need time for due diligence to be completed.
Lesson #3 - pricing your company. Your broker will analyze your business and compare it with other sales of similar companies and perhaps evene get a third party appraisal. Remember that it is not what you ask for your business that matters it is what a buyer will pay for it.
With the appropriate valuation you will be able to get the right price for your company, but remember the terms and conditions of the sale are just as important.
Lesson # 4 -confidentiality is the hallmark of the business brokerage business.
As they say:
“What happens in the business broker’s office stays in the business broker’s office”
But unlike Vegas, selling your business should not be a gamble. Selling your business should be a well thought out plan designed for you to win. Don't worry about word getting out that your business is for sale. In the business world - everything is for sale at the right price. You've put your blood sweat and tears into your business, so when the plan, time, price and conditions are right you are ready to cash out and then you can shout it to the rooftops.