3 Tips on How Not to Sell Your Small Business

3 TIPS ON HOW NOT TO SELL YOUR SMALL BUSINESS

Successful planning will have you laughing all the way to the bank.

If you are going to sell your business, here are three tips on how not to sell your business. Successful planning when selling a business can have you laughing all the way to the bank.

For an entrepreneur thinking about selling their business, it’s important to know the reasons why it’s sellable, and more importantly why it is not. Just recently, SCORE identified 3 main reasons on how not to sell your business:

First reason why not to sell your business

Don’t sell your business if you still love what you’re doing: If you still love your work and feel fulfilled every day, there isn’t a reason to step away from your business. Generally, business owners should look to sell because they want to make a lifestyle or professional change.

Second reason why not to sell your business

Don’t sell when the market is in a downturn: The value of your business is correlated to the market within which it operates – therefore, you should look to sell when business is good, not bad. There’s a caveat to not selling during a downtown-- the downturn must be temporary. If you anticipate growth in the future, hold for the rebound.

Third reason why not to sell your business

Don’t sell to the wrong person: Not all buyers are created equal. If you care about the long-term success of your business after the sale, you should do your due diligence for any potential buyer.

Make sure you’re selling for the right reasons if you really want to exit your business. 

With the recent upward economic trend and low interest rates, many small businesses are now attracting interest from potential buyers.  In fact, BizBuySell Insight Report found that a record number of small businesses were sold in 2018 for the third straight year.

Buying a business is one of the best ways for companies to enter a new market or increase market share. 

The best way to determine your business's actual worth is to hire a third-party accountant or business broker to conduct a business valuation. A business valuation typically starts by assessing the value of your company's current and long-term assets, income statements and receivables, short-term and long-term liabilities, and other metrics that show the financial health of your business.

If you are in the market to sell your business, you need to sell it for the right reasons and at the right time. Otherwise you will be seeing someone else laughing to the bank and it will not be you. 

Large Majority of Small Business Owners Completely Unprepared to Sell a Business in 2019

via GIPHY

A recent article in Globe & Mail details the fact that the majority of small business owners who are ready to sell their businesses in 2019 are completely unprepared to do so. With SO many other business owners out there planning to close up shop and sell their businesses for a nice exit in a baby-boomer-filled market, the statistics are mind-boggling considering we’re talking about the transaction of a lifetime, -literally. The author, Matthew Halliday states:

““Between 2012 and 2018, the number of businesses who just planned to close outright, rather than sell, tripled, from five per cent to 15 per cent,” says Corinne Pohlmann, senior vice-president of national affairs at CFIB. “What worries us is that they’re not finding buyers, and then their only option may be to shut down.”

Additionally, most entrepreneurs tend to put their businesses on the market long before they are ready – for example, without first bolstering lacklustre financial statements or securing relationships with long-time clients in writing. Few have formal succession plans, Ms. Pohlmann says, and many also tend to let their revenue slip in the years before a sale.

So, in that field of under-prepared businesses, it can be easier to stand out if an entrepreneur has the patience to proceed with the months – or years – of preparation needed beforehand.

The article emphasizes the importance of building the right team FAR in advance of the moment you’re actually hoping to sell. Preparation is key here…. If you do your research in advance and start identifying buyers early on in the process, you stand a MUCH better chance of being able to play multiple bids against each other when the time comes to sell.

Takeaway lesson? Put together your business exit dream team early on in the process, and let them keep the ball rolling and keep you from getting distracted with the day-to-day operations of your business.

To get matched with intermediaries that fit your geography, business, deal size, and more, head over to BizNexus and get your top three suggested intermediaries today, for free.

BizNexus -Learn More From Our YouTube Playlist:

Preparing to Exit a Business

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.