Business Exit Timing is of Paramount Importance if You’re Thinking of Selling Your Business at Anytime Within the Next 3-5 Years.
…. And Here’s Why ….
The odds are very difficult and they are stacked against you!
If you take any 100 businesses and put them up for sale, you will find only 20% of them will ever sell, and the remaining 80 will end up closing their doors in liquidation sale.
Leaving a trail of broken promises, shattered dreams, and jobs lost.
Get The Business Exit Timing Right.
The biggest mistake most business sellers make is that they don’t have an exit strategy.
Unfortunately most business owners wait until a random catastrophic event occurs, and unfortunately, Murphy’s Law shows up, and it happens at the worst time. It happens when there is a downward trend in business for one reason or another and the business isn’t making as much money as it should be.
So what do you do to correct this? “Business Exit Timing” is Critical and that requires you to have a Business Exit Plan.
Here’ How To Get Started:
Get The Books in Order.
You need to have your books in order – STOP living out of the business!
Most business owners live out of their business so they can decrease their tax
liability. They run auto expenses, travel and entertainment, cell phone bills, and other expenses through the business.
This strategy is legal, ethical, encouraged by the IRS, and of course, edified by the CPA’s.
The problem with doing this is, these expenses need to be added back to the business bottom line profits, and the more you add back, the more doubt comes into the picture from the buyer.
A much better way of doing this is, pay the expenses out of your personal account and take an owner draw from the business. This keeps the books clean and concise. Yes, you might have to pay a little more tax, but the payoff will dwarf the amount of tax you pay when you sell.
It’s CRITICAL to know the numbers and have your books in order.
B.S. Books will only get you B.S. offers when you sell – period.
Build Your Brand
About 95 percent of business owners have no idea what their brand is or what it means. While branding isn’t everything, it certainly has a lot to do with business value when it comes to “Good-Will.”
Here are 5 Brand Fundamentals:
- Brand Absence: customers aren’t familiar with your company, or only use it because it’s convenient to their location.
- Brand Awareness: customers know who you are and are familiar with you and your company.
- Brand Preference: customer prefer your company’s products and services over the competitors.
- Brand Insistence: customers are loyal to your brand and they refuse to use competing products and services.
- Brand Advocacy: customers become raving fans and recommend your products and services to others.
Each and every one of these are major contributors to the value of “Good-Will” and when you get to the level to where people are referring your business and service to others instead of you selling to them, the money begins to come in droves.
Know What Makes Your Business Valuable.
In order for your company to look attractive to a buyer, you need multiple
sources of income, a healthy customer base, and a solid management team in
I wrote a book titled “The 5 Fundamental Elements of Every Successful and Sellable Business.” It is available on Amazon in print and Kindle version.
(I’m humbled and super proud to say it made the Amazon Best Seller List the day it was released!)
Buyers are buying the future income stream of the business, so they look for a large customer base, brand awareness, systems in place and upside potential.
Buyers will readily buy a business that has management and employees in place because they don’t want to buy a job.
Keep It Quiet.
Selling a business is somewhat of a “Clandestine” operation and the fastest way to ruin a business is to let the world know the business is up for sale!
Employees will go elsewhere, vendors will become concerned about getting paid and about the new owner, and customers will miraculously vanish.
The only people who are happy to hear that you’re selling the business is the competition and you can bet your bottom dollar they will be shouting it from the rooftops for everyone to hear.
Selling businesses is very different than selling houses.
Many people think it’s similar, but they are two completely different animals.
The real estate model is the more people you tell, the more houses you sell. In the business brokerage industry, the more people you tell, the more businesses you kill.
Hire a Professional Business Broker.
As I mentioned earlier in this article – Selling a Business is somewhat of a “Clandestine” operation, and this is where a Professional Business Broker comes in.
Not all Business Brokers are Created Equal – because, as in all professions, there is competence and professionalism, and there is incompetence and unprofessionalism.
therefore, as you would do in any situation that you need to hire a professional, you need to do you homework, and you need to ask questions and qualify them.
In my business, I have a database of over 2,000 qualified business buyers and am associated with another 1,400 Professional Business Brokers who have their own list of buyers.
In every instance, buyers must sign a “Non-Disclosure” agreement before any information about the business is released.
A non-disclosure agreement (NDA), also known as a confidentiality agreement (CA), confidential disclosure agreement (CDA), proprietary information agreement (PIA), or secrecy agreement (SA), is a legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties will not share or distribute and information shared.
CAREFUL! Not All Business Brokers Are Created Equal:
Many business brokers have about the same rate of success as business owners do in selling their own companies. The key, to your success is finding a business broker with a proven track record.
Here are 9 questions you need to ask BEFORE you hire a Business Broker:
- Do you own the firm?
- What is your closing ratio?
- How many listings do you have now?
- What businesses have you sold and in what industries?
- Do you have a database of buyers and how many are on it?
- Who decides how much money is spent on marketing my business for sale?
- On average how much more can you sell my business for?
- Do you have any testimonials you can give? (“If they can’t give you any testimonials …. run”)
- What are your list of buyers looking for?
Ask yourself the following questions to determine if you should sell your
business and when should you sell:
- Do you still love what you do?
- How long have you been in business?
- Do you truly feel like you have a business?
- Are you still passionate about your business?
- Do you still have a burning desire to succeed and lead?
- Are you still creative and able to continue to grow your business to the next level?
- Do you still work IN the business or can you work ON your business?
- Are you growing market share?
- Is your business trending up?
- Are you making a profit?
If you answered “yes” to most of these questions, then your business is still in the positive phase and it is a GOOD time to sell, or at the very least, come up with an exit strategy.
You might be asking yourself, “What do you mean?
If I still love my business and it is doing well, then why in the world would I want to sell it now?
The answer is because this is the best time to do so.
Business buyers want to buy a business that is thriving not dying and the biggest The mistake sellers make is they wait too long before selling their business.
Here are some additional questions you should consider in order to determine if
your business is in a positive phase or a negative phase:
- Do you dread going to work?
- Are you working in your business?
- Do you feel like you don’t own a business, but the business owns you?
- Do you lack the passion for your business that you once had?
- Are you burned out?
- Do you feel your customers and employee are becoming a hinderance to you
- Do you find yourself snapping and arguing with your employees, or customers?
- Are you having a difficult time making decisions?
- Is your business trending down or has it become stagnant?
- Are you losing money or just breaking even?
- Is the business or are you personally in debt?
- Are you worrying about your business 24/7?
If you said “yes” to more than just a few of these questions, your business is in the negative phase and it’s time for you to get out before it’s too late.
Business Exit Timing is important for you to sell your business for Top Dollar.
Do you have a “Business Exit Timing” Strategy of Business Exit Strategy in place?