Selling a Business: The Seller’s Perspective
Selling a business ain’t for sissies.
How do I know?
Well, aside from my 20 years of helping business owners sell their business and teaching business brokers how to do it, the impetus for starting Worldwide Business Brokers back in 2001 was my experience selling my own – and of trying to buy another.
My Herculean efforts to buy a business after selling mine is a topic for another post. This post, though, is about what I went through selling – and it pertains to how, in our experience, most business owners view the undertaking; that is, with some level of trepidation.
With extremely rare exceptions, business owners have no experience selling a business and very little sense of the process – the time, money and effort it will take.
They generally have no idea how to determine what their business is worth. No idea how to identify the most likely buyers or how to market their business to those buyers.
They are completely unaware that something north of 80% of all small businesses – including Lower Middle Market businesses – involve some owner financing. They have no idea how to position their business so that it will more easily qualify for financing – or how to help the buyer find third-party financing.
And without financing, there’s no deal.
Given that most owners come to the point of selling their business with so little knowledge about what the effort entails, it’s small wonder that, when they try to do it themselves, they are seldom successful.
They have no idea that more than 80% of small businesses that come to market don’t sell – and they certainly have no idea why.
Even those few that start out with some degree of confidence are quickly ground down by the minutiae, the tire-kickers, the seemingly endless flow of the same questions, the relentless requests for additional information, copies of this and clarifications of that, the time that must be spent with a dozen or more potential buyers and the likelihood that none of them will ever pull the trigger.
Three months in, that original confidence has evaporated and, after reviewing yet another month of sub-par financial reports, they realize that their lamentable efforts to find a buyer have caused them to take their eye off the ball. They realize that their business is suffering and that, if they don’t turn this ship around quickly, its value will start heading south.
Selling a Business: Mine
Like most sellers, I had no experience with selling a business. Every seller I’ve worked with in the past 20 years was like I was back in the mid-’90s – a complete novice. As a result, like the experience of most business owners now, selling my business was a difficult and daunting task and remarkably unpleasant in its aftermath.
Why? For two reasons.
First, like most business owners, I had no idea what, I was doing.
I had a handful of friends that owned businesses and three or four of us would meet once a month for dinner to shoot the breeze about business, French claims to south Pacific islands, Mexican economic policy, the lamentable state of U. S. politics, the difficulty of finding good help, whether there was any future to this new email thing and other pressing issues of the day. We still do, in fact.
Each member of that group owned a business worth more than $1 million so, suffice it to say, this was a bunch of smart guys. They were my sounding board – but none of them had ever sold a business either.
I had no idea what my business was worth. I had no idea how to find qualified buyers. I had no coach to advise me as to the process; what to do, what not to do and what to watch out for. And that last cautionary note – what to watch out for – is particularly important as there are shady buyers as well as sellers.
Planning: Possibly the Most Important Part
Second, I had not planned for the event – and, therefore, I had not planned for what I would do after the sale.
This was the most emotionally impactful aspect of the event. I woke up the day after we closed on the deal and, for the first time in more than a decade, I had nothing to do.
Now, my situation was a bit unique in that my business wasn’t for sale. But that only made the situation worse.
All of a sudden, an offer lands on my desk. What do I do now?
We’ve launched a coaching program specifically tailored to Realtors that want to sell businesses and to novice business brokers.
If you’d like to learn more, email me at joe@WorldwideBusinessBlog.com
Well, the first thing I did was decline the offer: “thanks, but no, thanks. The business isn’t for sale”.
But the potential buyers were persistent and, in the long run – which wasn’t very long – they proved the validity of the old expression, “everything’s for sale.” Eventually, the number reached a point that, well, you know…
But was the price right?
I had no idea. Given that the buyers increased the offer to a level that I really couldn’t refuse, the price was certainly not too high compared to value – at least as the buyers saw it.
But it could have been low. I simply didn’t know.
Our course, “Learn How to Value and SUCCESSFULLY Sell Businesses“, teaches how to value and sell businesses.
Become a Professional Business Broker…
I’ve been in the position our selling clients are in and, over the years, I’ve watched our clients struggle with some of the same issues and doubts that I had.
That selling experience – plus my experience trying to subsequently buy another one – taught me several lessons that I bring to our clients and brokers – and what I teach in our course, “Learn How to Value and SUCCESSFULLY Sell Businesses“.
The seller has to have goals and objectives. This means a plan to sell, one that includes a timeline and value target. And that plan must be worked.
The seller has to have a plan for what he or she will do post-closing, whether it be sitting on the porch with a mint julep or sailing around the world racing The Big Dog.
The seller has to find out what the market suggests his or her business is worth because without that, they’ll have no idea if they’ll be able to realize their plan.
The seller has to have experienced guidance. From my viewpoint that comes either from someone who has already sold a business, a transaction attorney – one that has facilitated the sale of businesses or a professional business broker and M&A advisor. The kind of experience that will allow the seller to keep his or her eye on the ball so that their business
The Bottom Line
Selling a business is definitely not for sissies.
It takes planning and time as well as knowledgeable and experienced professionals to make it happen – to make it a successful endeavor and one that the owner can walk away from without regret.
As professional business brokers, it’s our job to not only educate our selling clients about the process but remove as much of the hassle from their plate as possible.
Our sellers must keep their eye on their business so that it continues to prosper during the selling process. Business owners rarely have enough time and mental bandwidth to continue growing their business while handling all the work necessary to sell it at the same time.
It’s also our job to keep them informed with regular updates. Email – what we thought was some questionable development 25 years ago – has certainly made this immeasurably easier.
In the next week or two I’ll outline my efforts – in the wake of selling mine – to buy a business. The story is pretty ugly.
If you have any questions or comments on this topic – or any topic related to business – I’d like to hear from you. Put them in the comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.
I’ll be back with you again next Monday. In the meantime, I hope you have a safe and profitable week.