Tag Archives: exit strategy

You Want to Sell Your Business Someday How to Prepare Today

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Every Business Needs an Exit Strategy.  Do you want to Run Your Business Forever?  Do you Want to Sell your business?  Do you want to leave your business to your children?  Do you want to sell your business to Your Employees?  Do you Just want to close your doors and Move on?  How do you want to exit your business ?- And when?

Recently a good friend of mine that is a successful business owner contacted me about the prospect of selling his business in a few years. He asked me to contact him regarding what he may want to be doing now to prepare his business for sale.  He has a successful growing business, he has grown his number of employees from 10 to 75 over the last 18 months.  He is effective at gaining new contracts and growing revenue, but like so many  businessmen, he has never attempted to sell his business.

Devising An Exit Strategy For Selling Your Business

Normally during the startup of a new business the thought of an exit strategy is not even a consideration.  Then small business owners get so involved with the day-today operation of their businesses that again an exit strategy is either not even thought of or possibly just put on the back burner.  Taking some time to put some thought into your exit strategy can go a long way to increasing your odds of exiting your business the way you desire to.

Planning, gaining knowledge, and preparing  may be the 3 most important measures you can take when considering an effective exit strategy.

If your exit strategy involves an interest in trying to successfully sell your business in several years, what sort of measures or actions should a business owner take to make this successful:

  1. Make sure your financials are in order. Clean understandable Income Statements and Balance  Sheets will add value to your business.
  2. Systematize and document your operations and procedures.  Well documented policies, procedures and practices are a sign of a well run company and  probably would help your company run better, and add value. If you got hit by a truck tomorrow could someone use your documented practices to help continue run your business?
  3. Move your business towards a business that does not rely on you.  Do your customers do business with your company or do customers do business with you.  When you go to sell your business are you selling a business that is dependent on you the owner or a self-sustaining business based on a solid philosophy, solid customer service and reliable employees and practices. Or when you go away, does your business go away?
  4. Speak to your trusted advisers- let them know your intentions see if  they have any input suggestions that could help move you towards this goal.  Trusted advisers may include your attorney, CPA, financial advisor, business brokers.
  5. Learn by speaking to your trusted advisers what are the most important aspects that affect your business value.  How does one value your business? What is most important to business buyers?-  Your Assets, your cash flow, your sales, your number of customers, your patents, trademarks, your competitive advantage.  Learn what the real driving factors are behind raising the value of your business and work on them. Understand that not all businesses that attempt to sell actually do find a business buyer and sell.
  6. Running your business and concurrently, preparing your business for sale is a viable  approach towards business transition. It is not a” one or the other approach”.  Preparing your business for sale does not need to get in the way of running your business, and most measures improve your business. If you make needed improvements to your business and or operations and decide not to sell your business or exit your business, you still most likely will have a better business on your hands.
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For planning purposes try to learn what the potential value of your business may be. Also educate yourself on the business buying or selling marketplace.  It is not always the same.  Selling a business during the 90’s was different than selling a business in 2006, and is significantly different than selling a business in 2010… and different than 2015 or 2020.

If you think you want to sell your business in 5 years for $1M, attempt to understand what realistically your approximate value may be today.  If your business may realistically only be worth $250,000- change your expectations, change your time frame, or maybe more importantly get to work on making necessary changes to your business.

Business Owner vs. Employee the Grass is Greener?-Business Broker Perspective

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I am in the business of helping people buy and sell businesses.  So many future business owners currently work for someone else.  Very often the thought process is that one would enjoy their professional career if they “worked for themselves”.  During my professional business career after college I have been an employee of others for about 5 years and have been a business owner with as few as 1 employee to  25 plus employees for approximately 25 years. I feel I do have some perspective from both sides of the coin.

Is It Better To Be An Employee Or A Business Owner?

I think you could talk with business owners and find that there are several that feel being employee has many benefits, and if one talks with employees you can find many that would like to be their own boss.  And of course there are the group of those that are happy or satisfied being either an employee or a business owner.

But so often we are tugged by the concept that the grass is greener on the other side of the fence.  Many prospective business buyers that I work with are ready to do something on their own.  They have had very reasonable business careers working for others but are ready make the move to buy a business or start a business and no longer be an employee.

Why may an existing employee want to buy a business or start a business–

Business Owner

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  • want to do it my way
  • feel I can do it so much better
  • feel being an employee is too limited
  • No longer believe in the company I am working for nor my job
  • Want to make more money ( maybe this should be at the top of the list)

Why would a business owner consider working for someone else as a good thing.  Again part of my role as a professional business broker in Florida is working with business owners looking to sell their businesses.  Part of the process of what I do is the discussion regarding  what one may do after selling their business.  The responses I get are very dependent on ones age and the amount of money one may gain upon the sale of their business.  Age is a very strong determinant.

Looking At The Long-Term Goals

But when we all get excited upon the idea of starting a new business or buying a business, its hard to “fast forward” and visualize a long term business owner that is somewhat exhausted by the demands of owing a business- and working for someone else is a pretty good option. Maybe not as good as selling your business and sitting next to a pile of cash sitting on the beach drinking frozen cocktails. But this option is not always possible.   Selling your business and going to work for others may bring on the following feelings and thoughts-

  • Liberating- The thought of not having to carry  around the strains that go with running and owning a business for many years can be very liberating
  • As a business owner the thought of collecting a paycheck on Friday instead of worrying about making payroll is appealing
  • As a business owner you get to make all the important decision.  Not having to make the important decision may seem like a good thing
  • As a business owner you find that employees get paid 1st you get paid 2nd.  At times that can be very rewarding, other times dealing with the unknown is difficult
  • When an employee crashes a truck your workload/cost may have just skyrocketed.  As an employee this event may result in no more than idle banter in the break room.

All of us business owners and employee out there knows the list can go on and on.  Want to buy a business?  Want to Sell a business?  Want to Start a business?  The grass is not always greener on the other side, but very often we need to jump the fence and see for ourselves.

Its not Who You Know its Who Knows You

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Our business world revolves around the type and number of business contacts and relationships we have nurtured.  Quality business relationships play a large part in a successful business. I am a business broker based in Florida and and I strongly value the business relationships I have. I don`t necessarily want to know more relevant people, I want more people to know me. As we network and strive to grow our business, its important to remember its not who you know, its who knows you.

Establishing The Right Relationships

We use various means to establish those relationships.  When we make it our goal to grow our businesses by “getting out there and meeting more people”, that effort can be somewhat miss-guided.  For every business person the needs are a little different.  I help people buy and sell business.  I strive to speak to more people that are considering buying a business.

I also prospect and market to reach small business owners that have an interest in selling their business.  In some businesses the largest asset may be the production equipment, in others it may be their building they own, in my business as a business broker my largest asset along with my experiences may be my business relationships.

Actually to me the concept of Business Relationships has changed significantly over the last several years with the evolving of the internet and social media. And the definition of a business relation has become somewhat blurred.

“On Facebook I have 1800 friends”, “on Twitter 12,000 Follow Me and I follow 14,000” “On Linked-In I have 2200  Contacts”.-  I actually dont have these sort of numbers but many of us know people that do.  The real fact, at least for me, is that if I have to use all my fingers and toes to count my real friends I consider myself fortunate.

Business Relationships

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Does Knowing People Mean That They Know You?

Do the 1800 Facebook friends know you ?, Do the 14,000 on Twitter know you?, Of the 2200 Contacts on Link-ed In , how many are going to shoot me an email when they want to Buy a Business or Sell a Business in Florida, or buy printer paper, or get my lawn service, or whatever my business offers?

As we strive to network and expand our sphere of relationships I recently got reminded of the actual goal of this effort , or rather what the end result of this effort should actually be.  Very often I think thru my networking efforts, I want to meet people, when really what I want to do is have people meet me, get to know me. I know who President Obama is,  I don`t really”know” President Obama.  So I know of President Obama- does that help my business -no.  But what if President Obama knew me or knew of me?

I know of Bill Gates-Microsoft.  So what?  What if Bill Gates knew of me?  But from a practical standpoint, knowing the president of the small business right here on Main St is nice, but meeting him and striving to get him to know me, and when he and his friends are talking and one strikes up the all to common conversation of ” Do you know anyone who…..”   can help me buy a business in Florida, this small business owner can say yes, I know this great business broker and his name is…

How to Sell Your Business for More

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At some point a business owner considers selling their business.  Sometimes it is just a fleeting thought.  Sometimes its a thought of  “I don`t need this anymore, get me out”.  Other times its a well planned out progressive process.  You want to sell your business- how do you sell it for more.

This sounds like a fairly straight forward approach, but just as the selling of a business process can be very involved, the question of how to sell it for more firstly needs definition.  I am a business broker based in Florida and speak to many many business owners about the potential sale of their business.  I also sold my own business several years ago.

Selling Your Business When The Time Is Right

Just consider the simple analogy of having a rusty bike in the garage with flat tires that you want to sell today.  You put it out at the end of the drive way put a For Sale sign on it- what do you think it will sell for?  How can you sell that bike for more tomorrow than you can today?

Selling Your Business For More:

  • Selling your business for more can be a very good thing and very reasonable goal.
  • Trying to sell a business for more than it is worth can ultimately result in your business not being sold at all.
  • Setting the Goal today to improve your business, prepare it for sale so that it is worth more after your improvements is probably your best approach
  • Wanting to sell your business for more than “what you heard a local competitor sold for” can also be a mis-guided path.

Preparing Your Business For Sale

So selling your business for more is a reasonable and understandable goal.  How do you get more for your business?  Start today preparing your business for sale.  Like so many of your other important business decision, prepare yourself a to-do list and systematically address those items.  Below are some items you will want to include on your to-do list to help ready your business to sell for more. Ask and honestly answer these questions about your business.

How  are your financials?  Are there some unusual entries on your P/L that have escaped needed adjustment?  Are all sales accounted for?   Do you have a good clean P/L statement?  For smaller businesses Do you have a P/L and Balance sheet?

How reliant is your business on you.  What can you do today to help your company be more about your company and less about you.?

How documented are your systems, procedures, policies, pricing structure?

Right Customers Base

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Is your customer base as diverse as it should be?  How reliant is your business on a few key customers.  And again do those customers do business with you the business owner or with the company?

Do you have the opportunity to add recurring revenue streams to your business, but elected to not pursue?  Do you have some contracted customers that you just haven’t updated contracts with?

Spend some time to meet with some of your trusted advisers.  Dont rely on information you hear through the grapevine about this person selling their business for this amount.  Talk to your attorney, your accountant , or visit with a business broker start to really learn the marketplace.   Have you scraped the rust off your bike?, painted it ? oiled the chain? pumped up the tires?  put an ad in the newspaper? on the Internet?- Is your bike worth more today than it was yesterday?

How do you sell your business for more tomorrow or next year  than it is worth today?  Start today preparing your business for sale.

Sell or Buy Business with goal of Hybrid Retirement

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Owning a business can be a very rewarding experience.  Many will buy an existing business or start a new business with the thought of building the business to the point that it is a successful viable entity that they can sell and live comfortably on the proceeds.  There currently are millions of small business owners in various stages of planning the exit of their business.

I want to sell my business so I can retire comfortably.  There are also millions of aspiring entrepreneurs that are considering buying or starting a business with the goal of building it and growing it to the point they can sell it and retire comfortably. It seems so often when discussing what one does it is described as working or retired.( In today’s economy unemployed, looking for work is another status).

I beleive there is a  status between working and retired, and I refer to it as Hybrid Retirement. I certainly don’t see myself as any retirement expert or financial planner, but I have been thru the process of selling my business that I had for 20 years  and have developed my own views on retirement that possibly one going thru the daily work day does not have the time to consider.

My current profession is as a business broker in Florida. Within my community I am surrounded by retired people, and also after the sale of my business I did take “some time off”.  As a business broker I speak to many business owners considering the sale of their business. One of their top considerations is “If I sold would I have enough to retire?” .

 Why not aspire to Hybrid Retire?

I personally think the majority of those currently working full days either employed or as small business owners look forward to the day they can retire, stop working, and spend the rest of their days fishing, golfing, or hobbies. Of course your age at the time of cashing in can greatly affect your decision process. If you are 75 years old, maybe you say enough is enough and just head to the golf course.  But if you are fortunate to be successful and exit in your 40’s, 50’s or maybe even your 60’s your perspective, and needs could be greatly different.

The thought process for someone thinking of selling a business goes something like this:

I think I need to sell my business, walk away with $500,000 and that will be enough for me to retire.  But what if you had someone that would buy your business and allow you to walk away with $400,000?  Maybe this is a good time to entertain such an offer and consider Hybrid retirement.

Hybrid Retirement

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If you believe you need $50,000 per year to live off of, and the sale of your business may give you $35,000 to live off of, should you walk away or consider.?  Many small business owners get overburdened with the responsibility of owning a business, and really want to sell those responsibilities away to others.   Maybe making the $25,000 monthly payroll or covering the $100,000 per month fixed overhead cost month after month just gets to be too much.

Perhaps you can consider upon the sale of your business,  you can find another business to buy, possibly one that you have aspired to do for years, or possibly work for someone, under terms conditions that fit your lifestyle.  But this second business you don’t need to make that high monthly expense, and now you are supplementing the proceeds you have from your sale, and what you need to draw from the business is a lesser amount.  “Needing” to make $15,000 per year instead of $50,000 can be somewhat liberating!

Why Hybrid Retirement?

  • Do you really know that you can “do nothing” after working for 20, 30, 40 + years
  • You have someone looking to buy your business near the price you think you need.  maybe consider the offer and plan to supplement the difference with a second career, part time job etc.
  • This is an opportunity to build a profession around your lifestyle, whereas before you may have had to try to build a lifestyle around your business.
  • Are you really prepared to try to live off a “fixed income”- supplement that with something you aspire to do.

I think currently due to economic condition there are many small business owners delaying the exit / sale of their business because the recent performance of their company may not allow them to achieve the “walk away” money they believe they need to retire comfortably on.  There also are eager entrepreneurs ready to start a new venture with hopes of one day selling and retiring off the proceeds.  Maybe planning for both of the above scenarios can best be addressed by allowing yourself to consider Hybrid retirement.