This is the tenth instalment in the series, and I thought it might be an idea to take stock of where we are now, and ask the question: “Why sell your business anyway?”
I think that’s a pertinent question, and one which should be answered by every potential seller of a business. It is certainly a question which is asked by every purchaser. The thing is, you know exactly how your business works; you know about the cash flow of your customers, you know how they pay, and you may even know them personally. Add to that: you know your product or service intimately, and by leaving the industry you will have to venture into the great unknown, to learn about new customers, cash flow in different circumstances, how far you can push new suppliers, and you may even have to learn a new skill.
So why does the typical seller want to sell her business? Does it really matter? Well no, in the final analysis, it doesn’t matter; but at the beginning of the process it matters hugely to the buyer. He needs to be sure he isn’t having the wool pulled over his eyes, and that there isn’t a long and dark tunnel about to open up in front of him. An ice breaker in the initial investigation is “so why are you selling?”
What’s wrong with simply selling for profit? Of course there’s nothing wrong with that, but unfortunately it doesn’t instill great confidence in any buyer, and so sellers find all sorts of “reasons for the sale”.
Consider whether or not your motivation in selling the business is honorable. This is a matter for your conscience at this stage. Bear in mind though; dishonorable and fraudulent reasons for sales have a habit of biting sellers in the backside at a time which least suits them. Yes, they get a clump of money up front, but ultimately they end up scrambling for other sources of funds later in defense of their subterfuge. A sort of short term gains for long term losses scenario.
Part of my motivation in persuading people to embark on this long term program of PrepareYourBusinessForSale™ is to attract and keep business people with a long term business goal in mind, rather than those who are desperate to transform a personal cash flow crisis into a fire sale of their businesses.
A very telling answer can often be elicited from a seller by asking the question “What will you do after the sale?” Sometimes the answer is weighed up carefully by a buyer in combination with other answers.
Let’s leave the finer nuances of selling strategies to another day for now, and instead consider the question in a straight forward way. If you are selling for any other reason that retirement, ill health or death:
- Do you have another income producing activity to get yourself into?
- Will you make so much money out of the sale of your business that you will never have to work again?
- Have you forgotten the heartache and sleepless nights you went through, learning the ropes of this business in the first place?
On many occasions I have advised prospective sellers to hang on to their little money spinners. Of course I am seldom listened to, which I guess is just as well, as I’m in the business of helping business owners to sell their businesses.
More often than anybody would like, I am asked to sell a business which needs to be sold today, rather than tomorrow because of some personal calamity like serious illness or death. In those circumstances, the sale of the properly prepared business can yield enough to make a sick owner more comfortable, or a widow self sufficient. And it is those instances which prompted me to prepare and present this course.
A properly prepared business on the market sells efficiently and for a good price. A poorly prepared business on the market is on a hiding to nothing. You are here for the efficiency, I know
Please never forget this: Something awful may happen to you, rendering you incapable of either running your business or selling it. Your heirs, survivors or dependents may need to sell the business for you or your estate; and without your input, just how complicated is that going to be? And how much simpler would it be if you prepare your Pitchdeck diligently. (You thought I was going to say “prepare your business for sale”, didn’t you?
So please go back to the last instalment and consider the questions asked around preparing that Pitchdeck, and look back through the earlier instalments, get out your “Prepare Your Business For Sale” file and make sure you have covered the requirements properly. Scan paper documents reducing them to digital equivalents able to be transmitted around the world, and store them in your “PYBFS” folder on your desk top.