We are in the midst of one of the largest transfers of wealth in history. This transfer is happening as baby boomers who own businesses are looking to sell their businesses as they move into retirement. As much as 80% of businesses owned by baby boomers will be sold in the next five years. But the biggest thing getting in the way is that most businesses are not ready to sell. And because of that, business owners cannot get what they want or expect for their business. My advice to business owners is clear. Start now to plan for your exit. Only then can you exit your business on your terms, instead of someone else’s.
The reality is that there are a lot of businesses for sale. And, with 80% of baby boomer business owners looking to sell in the next five years, we should see even more businesses on the market. And just like with real estate, when the inventory of available businesses on the market goes up, the prices will get more competitive and sellers are less likely to get what they want.
Further complicating the issue is the fact that baby boomer business owners (say that three times real fast) have as much as 80%-90% of their personal wealth tied up in their businesses. That means they have to get a reasonable offer on their business or they won’t be have enough to retire on.
Selling a business is a highly emotional decision. For many business owners, this has been a passion that they have been involved with for many years. Some have been in families for multiple generations. And if the buyer is not another family member, it is a highly emotional decision to make.
Many business owners I know are worried about several things in regards to selling. Not only are they concerned about getting enough to support their future plans. They are also concerned about their legacy and that of their family. And for those looking to sell to someone not in their family, they are struggling with the idea of the business no longer being part of their family’s legacy.
Make a Plan
To exit your business on your terms, you need to put together a plan. You need to make changes to your business that will maximize your value when you sell it. This is not something you can do at the last minute. Buyers look for trends, and making a change too late will not demonstrate the types of trends that buyers will be looking for.
Think Like a Buyer
And that brings me to my first advice. Think like a buyer. Just as when you sell a house, you need to put your business in the best possible light. That may include physical improvements to your plant. It may mean changes to your organizational structure. It also may mean that you need to implement strategic changes to products, customers, marketing or other key areas.
Built Your Exit Team
This is an incredibly important event. Second to starting your business, exiting your business is one of the most significant activities you take on as a business owner. Therefore you need to surround yourself with a group that will support you in the process. The members of the team may include:
- Business advisor – responsible for guiding the overall process
- Business broker – responsible for the activities of listing and selling your business
- CPA – responsible for identifying various tax implications and for providing financial records to potential buyers
- Financial Advisor – responsible for helping you prepare for life after your business, and to make sure your financial position is protected during those years
- Attorney – responsible for protecting you from a legal perspective and drafting and approving all contractual language
- Banker – responsible for any financing that may be needed on your behalf
Identify Your Potholes
Potholes get in the way of an easy drive. We want your exit to go smoothly. But just as potholes can interfere with a pleasant drive, they can interfere with an easy transition of a business. And when we identify a pothole, we have two ways to deal with them. We can repair them, or avoid them.
There are a number of things that can get in the way of selling your business. These can range from family members in your business to barriers that may be in the way of someone taking over your company. Leases can interfere with the transfer of ownership. Customer loyalty to the owner may impact the value post-sale. Who owns your business’ Intellectual Property? We have identified at least 43 potential “potholes” that can get in the way of selling your business.
Interested in learning more? We host Exit Planning Workshops for business owners considering an exit in the next few years. Register here.
Start With a Business Advisor Today
As a business coach and advisor, I work with business owners to help them make this transition go as smoothly as possible. By identifying potholes early, we can put together strategies to repair them, or take the process in a direction to avoid them. But the most important thing to remember is that this takes time. You cannot change your business overnight. Some of these potholes may have been created by years and years of intentional activity.
Contact me if you would like to learn more about how this process works. I work with business owners of companies of various sizes in helping them determine the value of their business, and to put together a strategy to maximize the value of their business. Then, and only then, can you exit your business on YOUR terms! Email me today at firstname.lastname@example.org.