Anyone can sell a business. The selling is the easy part. Making a profit, by contrast, is another matter entirely. Business owners must first assess whether they are emotionally prepared to sell since emotions can run high and may ultimately affect finances. It’s similarly important to weigh whether the business is financially prepared for a sale.
Signs You’re Prepared to Sell
Reviewing monthly profit and loss statements is helpful for getting a rough view of how well the business is doing. But this is just the beginning. Other strategies that are critical for readiness include:
- Meeting regularly with a personal financial advisor to assess whether an owner’s personal finances are ready for the sale.
- Assessing costs after retirement. What are your goals for the future, and how much money do you need to meet them?
- Getting the real numbers. You need a clear and comprehensive analysis of business value that looks at drivers of value as well as potential liabilities. Most business owners go with their gut rather than hiring a pro to do this assessment for them. Don’t make that mistake. Paying for an expert valuation gives you a much better grip on the real numbers.
- Addressing value gaps between your perceptions and reality. Identifying these gaps can help you devise and implement a strategy that propels the business to greater success and more financial readiness.
Your Entrepreneur Type
Your approach to your business can help inform the sale process. Many entrepreneurs fit into a specific type. Identifying your type may help you better assess preparedness:
- Financially fit: These owners have enough money to fund their future lifestyle. Their personal finances are independent of the business, and they do not need a lucrative sale to fund the next step.
- Illiquid owners: Most of their network is locked up in the company, so their retirement depends on a lucrative sale.
- Burnt out owners: These entrepreneurs are over the demands of running a business. Financial concerns are secondary to their daily stress. They just want a path out.
- Risk reducers: These owners are not financially well off, and may even be feeding their company from personal finances. They need a buyer so they can get out and stop losing money.
Colloquial wisdom suggests an exit can only be profitable for the first two types. But there are viable exits even for struggling owners. The key is finding the right exit path—one that is tailored to the needs of the owner and business. The right assistance can drive more value for most companies, if the owner is willing to get expert insight and put in the necessary work.
Anyone can sell their company. And with enough preparation, almost anyone can increase their company’s value so they can extract more value when they sell. A lucrative sale demands expert insight. So begin assembling your team well before you need to make an exit.