Most business owners work hard in the early years to establish their business and accept a low income and long hours as part of the price of being your own boss. Once the business is on a sound footing and doing reasonably well, you are happy to have a decent income and hopefully put a little something away for the future. And then when you are done with the business this is the time you are looking for the big pay off- the reward for all your hard work, worry and sacrifice over the years.
For most business owners it doesn’t work out this way, it is a well known fact that approximately 80% go bust within the first three years. It is a less well known fact that 80% of the remainder will fail within 5 to 10 years. And the sad news is that a very high percentage of the remainder never get the big pay off but either get a small payment for the business or simply close the doors and sell off whatever assets remain at low prices.
For those that do make it to the end game, there is no reason that they should suffer the fate of the majority and end up with either a bad deal or no deal at all. The reason that most exit strategies don’t work is because there isn’t one in place to start with. It sounds crazy I know, but that is the truth of the matter. The real problem is that most business owner’s focus on short term planning, making sure everything is ok now, that they fail to see the end game until they are in the middle of it! What happens then is either their health goes or their energy levels drop off or some major shift in their sector comes at them out of the blue and all of a sudden they are fighting a rear guard action or worse again fighting for survival. But there is another reason why lots of people don’t get to cash in their chips and the reason is almost unbelievable. I find it astounding that there are so many business owners who believe that they have nothing to sell because they see themselves as the business. Nothing could be further from the truth – every business is sellable.
So what is the secret to successfully disposing of your business on your terms? Its simple really- make a plan! Ideally you want to be thinking about your exit strategy 3 to 5 years before you want to sell. The reason for this is because no matter how much time you have to prepare, it is unlikely that you will ever get to the point where you are happy that you have everything the way you want it. Well organised businesses can be successfully disposed of within tighter time scales.
How you maximise the price of your business is to first of all look at it through the eyes of your ideal buyer and then present it to potential buyers in a way that is attractive to them. In the planning stage you will have to think about those things that aren’t just quite right need to be updated or improved and then get them sorted. The chances are you may not be aware of all the things that have to be dealt with so you will need someone to cast a critical eye over things for you and point you in the right direction. This is not unusual because when you live with something everyday you tend not to notice it in the way that strangers will. It’s important to make sure you value your business and all the assets in it in a realistic manner then strip out anything that is not essential to the business.
The most important asset in any business is the customer base because with out them you don’t have a business. Too often business owner s devotes insufficient time to grooming the business in general and the customers in particular, for the sale.
The customers are the real value in your business and they deserve the most attention so make sure you know them, tend them closely and protect them form fiercely from competitions because they are your gold dust.
Why, I hear you ask, do you need to start planning for the sale as much as 5 years before you intend to sell? There are several good reasons for this and the first is the most important. Virtually every business owner I have coached through this process over the years has had a very strong emotional attachment to them in business – it’s a part of them. You will need time to acclimatise to the idea, to condition yourself to your pending ‘bereavement’. I have one client at present that I have been talking to for the last 15 years about letting go and he’s still not ready – he is 84 – yes 84! He doesn’t need to work but he’s there everyday from opening time to closing time and he doesn’t even take extra holidays or time off!
I have another client that I have been talking to for 7 years who has a deal close to sell in early 2014. He’s 70 on his next birthday and he’s not sure if he’s ready to go through with the sale yet! It’s important you have enough time to ready yourself for the sale.
Another important reason to allow time for the process is to accommodate whatever tax planning issues that may arise if business and non business assets are all lumped together or alternatively if they are held in separate legal entities you may need to do some reorganisation and planning that requires time to execute in the most beneficial manner.
And finally you will need time to groom the business properly for the sale – the more complex the business then the more time you are likely to need to prepare it for sale.