Want to sell your Business?
You have spent lots of time, effort and equity into developing your business and now you want to sell. To get the best price for your business, to get maximum value for all that time, effort, tears, highs and lows.. you need to plan your exit.
That planning can take some time, money and expertise.. Just suddenly deciding to sell and taking any old offer – will not result in a good return on you time, expertise and experience.
Let’s look at some of the numbers behind Business sales – or, more to the point, non sale of businesses:
- Only 1 in 5 businesses sell
- 75% of business owners who do exit, regret that decision within in 12 months
- Only 30% of family businesses successfully transition from first to second generation
- 94% of business owners who want to sell over the next decade, will not be able to do so
- Of those that do sell – over half will have to sell with concessions
All these figures will get worse as more business owners get older and want/need to sell.
50% of Business owners exit their business through the 5D’s – Death, Disability, Divorce, Distress and Disagreement. If one of the 5d’s strike and you have to sell to settle the issues – then the value of your business I likely to collapse by up to 80%
Thus on the empirical evidence accumulated from a number of sources the chances are it will not sell, you will regret selling it or the business will not survive the second generation
There is a better way – plan for your step away from your business, just like you have a Business Plan , you must have an Exit Plan- and you need some time not only to create the Plan , but you need time to let the exit plan add value to the selling price.
What should be in the Exit Plan?
- Determine what your business is worth – this can be complicated and can be very subjective. In the end your business is worth what the market will pay
- Having determined what your business is worth, you now need to spend: time, money, experience and expertise, to make changes to increase the value. There are always ‘low hanging fruit’ – but that may be 12 months before it affects the value of the business
- Prepare your financials with your accountant – make sure they are accurate. Include an adjusted P and L to present to buyers that include some explanations of some of the more important numbers
- Prepare a Memorandum of Understanding (MOU) about the Business – always present this document in language that the buyer will understand and make sure that it is presented with the buyer in mind – not from the perspective of the seller – be honest, be transparent
- Within the MOU, develop an Executive Summary to effectively and succinctly communicate the key points – Mission, Goals, Strategies, Unique Selling Proposition (USP), Target markets , Operations etc
Once all this has been completed then engage an expert to help you through the details, and maybe bring a Strategic perspective to the process. It takes time – on average it takes 7 months to sell a business – may be more if you need to take action to increase the value of what you are selling.
For more thoughts and support contact me.
Robin Martin
P.S. This article is part of my Secrets of Success series, aimed at helping business owners and entrepreneurs with some of the key components of business success. The insights I wish I’d had at the start of my business career. I hope that by passing on these little gems of knowledge I can give you some support and help you along the pathway to growth and prosperity.
The content above has been adapted and updated from details that I read about recently in a book by Bruce McGechan – ‘Selling a New Zealand Business with No Regrets’ – which I highly recommend to anyone who is seriously thinking about the subject. You can purchase a copy here.