99% Of Small Businesses Fail To Sell Because Of Their Owners
Whether it’s the emotional attachment, the financial implications or simply wondering what you’ll do with all your free time, selling your business may be one of the hardest things that you’ll do as a business owner.
Given the significance of such an event; the time invested, the expertise brought in and the preparation you put into it, a sales process couldn’t be more important.
Our experience has shown that almost all of the problems brought on by a sales process can be pinned down to one person, you the business owner.
In this blog, we’ll look behind the main reasons sales processes fail and what you can do to ensure that you get the best deal and best experience from one of the most stressful events in your life.
You’ve failed to prepare in advance
Exploring the eventuality of selling your business is often a process that bounces through an owners head for a number of years but more often than not, the work needed to ensure you get the ‘best deal’ possible is crammed into a short window a couple of months in advance.
We suggest planning your exit as far out as possible, creating at least a 2 year timeline to ensure both you and your business are ‘fit’ for the event. This is normally broken down into the following actions;
Setting exit KPI’s for you and your team to strive for;
Getting financially fit. Ensuring your financial performance, reporting and any potential add-backs have been found in advance of a sale;
Actively planning potential buyer targets and starting soft conversations;
Ensuring you have a management structure in place that spreads responsibility, provides incentives and prepares your business for a life without you; and
Looking at what you’ll actually do after the sale of your business, what you’ll spend time doing and what’ll give you purpose.
Whilst the phrase “a business plan is only as good as its exit plan” has been incorrectly overused, in this case it certainly holds true.
Action point
Start the process of selling your business at least 2 years in advance of a sale.
Your expectations are not aligned in advance of a process
We regularly see business owners go out and ‘test’ the market to see what their business is worth without doing the work necessary and in hope of being able to strike a quick deal at the best price.
This is driven by either;
Not wanting to pay for help and expertise;
An emotional desire to sell; or
Inexperience with knowing how to best sell your business.
This approach often leads to disappointment and frustration. Not only for yourself but with key management, advisors and potential buyers.
In the UK, the SME and PE community is relatively small and the last thing you want is to be caught up in a cycle of constantly “shopping” your business creating “buyer and process fatigue”.
Action Point
Understand the methodology and benchmarks for valuing your business well in-advance of starting a process
You’re not investing in the “right help”
When seeking help in selling your business the question you should be asking yourself is;
“Who is the best person and what are the right resources for ensuring the best process and not the best value”
Why?
Typically, the money will follow a well thought-out and structured approach rather than hiring a “broker” promising to get the most amount of money.
So, when getting help ask yourself who’s the right person to guide me through this process. Speak to other business owners and ask them how their advisor helped steer them through difficulty rather than hiring an advisor based on who “promises” the most value or who charges the least upfront.
Action Point
Seek the best person/firm to guide you through the process and avoid “brokers” who’ll “shop” your business around.
You’re too emotionally involved
Selling your business is emotional and so it should be. It represents years of hard-work, sacrifice and the staff you’ve employed are like family.
So ask yourself, should you be the person in charge of negotiating and leading the sale of your business?
Whilst it’s impossible for emotion to not be involved, selling your business should be done with a rational head, backed by reason and well prepared.
You need someone who will steer you through the process, positively challenge you when you’re being unrealistic and someone who will protect you from the emotion of negotiation.
Action Point
Try and remove yourself from as much of the front-facing process as possible. Empower key-management, set clear/ well-planned expectations and hire someone who can guide you and you can lean on.
