According to Price Waterhouse Coopers, over the next ten years approximately 50% of all owners of small and mid-sized companies will exit their companies. Retiring baby boomers are driving this massive exodus from the marketplace. Unfortunately, among the group of small business owners who exit their business, only about 1 in 5 owners are successful in selling their company. The remaining 80% of these business owners are closing their doors with a big fat zero for all their hard work!
Why is this happening? Reality is that not every business is saleable. Additionally, there are a limited amount of business buyers who have lots of businesses to choose from, and they are shopping for the best return on their investment. In the business acquisitions world, over the next few years it will likely become a buyer’s market.
Business owners are reluctant to create an exit plan; it seems like planning for your own funeral. They are afraid of what life will be like without their business, so they do nothing. However, the truth of the matter is that there is opportunity in selling. This is an opportunity to cash out now, and enjoy the fruits of their labor. This is an opportunity to try something else; another business, ministry, travel, time with family.
Below are some things you can do to increase your chances of selling for big bucks;
10. Create an Exit Plan. You know the drill; “those who fail to plan, plan to fail.” The problem with failing to plan is obvious. Hire an Exit Planning Coach.
9. Plan Three to Ten Years in Advance. Most experts say that you should have an exit plan when you start a business. Three to ten years is the minimum time to prepare.
8. Sell From a Position of Strength. You can command top dollar when your business is strong, growing and you love it! Unfortunately, many owners wait until an economic turndown, a health crisis, or burnout forces them to sell from a position of weakness.
7. Know the Value of Your Business. Every business owner should get an annual valuation on their business; this is the best indicator of a company’s performance.
6. Get Revenues and Profits up. Your business should be growing; both top line and bottom line. Become the number one or two largest business in your market.
5. Develop Management Succession. If you're the only one who can run your business, who will a buyer have to help run the business after you leave?
4. Maintain Confidentiality. This is critical to the health of your organization. If your competitors, customers, employees or vendors find out that you are selling, this could mean disaster for your company!
3. Keep Focused on the Business. Don't let your business performance decline because you're too focused on the sale of your business. Work on your business as if you don't plan to sell it.
2. Get Help From Professionals. You will need an Exit Planner, a Financial Planner, a Professional Employer Organization, a CPA and a Tax Attorney on your team.
1. Get Your Books and Records in Order. Hire a CPA to prepare your statements; this will give the buyer confidence in your financials. Also get your legal documents in order.
Even though only 20% of all small businesses are selling, it is possible to get yourself into that group. But it is going to take some planning and some more hard work to get yourself into that group. You should start today!
Alan Melton returned to Upstate SC in March 2004 and founded Empire Business Brokers of Greenville-Spartanburg in Greer, SC. His company is focused on Exit Planning and Business Acquisitions. A member of the International Business Broker Association with over 1500 business brokers, Alan has been business owner since 1983.
Alan has been buying and selling businesses for the last fifteen years. He has coached, advised, and taught hundreds of small business owners over the last ten years. Alan is a nationally known writer, speaker and business leader. Over the last 24 years, Alan has started and led eight companies.
Alan Melton co-founded and served as CEO of East Coast Transportation from 1983 to 2001. With 130 employees and 8 million dollars in annual revenues, the company was listed locally and nationally over a decade as one of the fastest growing privately held companies. Prior to selling E.C.T. to a publicly held company, Alan was recognized by the President of the United States as the SBA’s Small Business Person of the Year for the state of Florida, and by the Florida Governor as the recipient of the Sterling Award for organizational performance excellence; joining a distinguished list of recipients such as Merrill Lynch, the Ritz-Carlton Hotel, and Honeywell.