Selling Your Business. This is the third in a series of articles that will provide information to business owners who are starting to think about exiting their business. Should you wish to learn more about how to plan for your exit, contact Donald Stevens at firstname.lastname@example.org or visit http://www.donaldstevenscfo.com/.
This is the number of privately held businesses that were sold in 2017. Compare this to the 20 million privately held companies in the United States. Less than 1/10th of a percent of privately held businesses were sold.
How could the number of businesses sold be so low? The answer is not attributable to either a lack of potential buyers or a lack of available investment funds. It is estimated that there is approximately $3 trillion in private equity funds. Global private equity funds raised $453 billion in 2017 per industry tracker Preqin.
The reason for so few sales is simple. Most businesses are not saleable. The reasons why businesses are not saleable are many, but here are a few of the most common ones:
- The business is too closely aligned with the owner. The owner is the business.
- The business is too small to warrant the expense and effort of going through a buy / sell transaction.
- The owner has an unrealistic expectation of the value of the business.
- There are substantive operational issues or risks that buyers are unwilling to accept.
- As the owner ages, the business just fades away. (See my previous article on emotional readiness to sell your business.)
- The business fails.
So, what can you, the business owner, do to increase the likelihood that your business is saleable?
First, well run, growing and profitable businesses are generally saleable. Does your business have a strong management team that can effectively run the business while you are vacationing in Europe for a month? Do you have a trend of year over year revenue growth that exceeds industry averages? Are you gaining market share? Are your operating margins at or above industry averages? If you can answer yes to most of these questions, then you may have a business that is saleable. If you answer no to most of these questions, are there changes that you can make, and are willing to make, in the business to change the answer to yes?
The Success Team™
The next step in making your business saleable is to assemble what B2B CFO® calls the Success Team™ of highly qualified trusted advisors that will guide you through the sales preparation and sales process. The Success Team™ will minimally include a business transaction attorney, CPA, investment banker or business broker, financial planner and a B2B CFO®, who will act as the quarterback. There may be additional advisors that are consulted for any given business, including as examples, insurance agents, real estate agents and attorneys specializing in employment law, ERISA, intellectual property, etc. Of course, the most important member of the team is the business owner.
If you were planning to sell your house, you would do certain things to it that would make it look its best to potential buyers. This may include painting it, updating landscaping, removing the clutter, etc. You need to do the same to your business. You need to show profitable growth, an engaged management team, operating processes that are documented, well organized financial, legal and personnel records, etc. However, instead of taking a few months to complete these tasks for a house, it could take several years for your business. The Success Team’s™ responsibility is to help the business owner prepare the business for sale.
The single most frequent reason that buyers walk away from a potential purchase of a business is attributable to deterioration in the performance of the business. The reason the business performance deteriorates is because the business owner takes his/her eye off the ball. Selling your business is a distraction. The business owner will devote time, effort and worry to it, taking away from running the business. Customers, vendors and employees may learn about it and become concerned. Competitors may learn about it and take advantage.
By using the Success Team™, the business owner will stay fully informed and make all the critical decisions that are required, but not be fully occupied by the myriad of details that the process entails. The business owner can devote most of his/her time to running and growing the business. Using the Success Team™ will also allow limiting the number of employees and other impacted parties that need to know about the business owner’s intentions, reducing the anxiety that comes with uncertainty.
Are you ready to sell your business? Would you like an assessment of how saleable your business is? If you are ready to start planning your exit now or would just like to know more about what exit planning is all about, contact me, Donald Stevens at email@example.com or visit http://www.donaldstevenscfo.com/.
B2B CFO® https://www.b2bcfo.com/ has several resources that educate business owners, assist in developing exit strategies and ultimately assist in the execution of those exit strategies for owners of privately held businesses. These include The Business Sale Solution Seminar™ which is an educational program developed to prepare business owners for the journey they will take when selling their business. The Exit Strategy Handbook is a companion to the Seminar, providing further detailed information on selling your business. Our B2B Exit® Software serves as a project management tool and an internal valuation tool for preparing your business for sale. Most importantly, there are the B2B CFO® Partners, 220+ strong, located across the USA, each a highly experienced financial professional, and ready to guide you through this adventure.
Are you ready to begin planning for your eventual exit from your business? It is never too early to plan. Contact Donald Stevens, a B2B CFO® Partner, at firstname.lastname@example.org or visit http://www.donaldstevenscfo.com/.