Entrepreneurial drive is one of the things that has made the United States not only a great country but one of the most innovative and productive societies that has ever existed on planet Earth. Progress, however, often comes with a price.
In the case of business ownership, those who have never owned a business invariably list most of the following as reasons for wanting to own their own business: set my own hours, have control of my financial destiny, not having anyone telling me what to do, etc. Interestingly enough, virtually all experienced business owners will share with you that:
- The demands of the business set the hours, and they are typically long
- The economy, competitors, vendors, and bankers all significantly influenced their destiny
- Market conditions, the realities of Human Resources and industry conditions have told them what to do
Causes of Dissatisfaction in Small Business Owners
Many successful business owners thrive in this non-stop, problem-solving environment and thoroughly enjoy the challenges, the experience and the ability to see incremental progress. Others, particularly if the financial returns are less than desired, soon grow weary of the hours, managing cash flow, and the non-stop challenges and the appeal of a 40 hour week, a regular paycheck and no financial commitments to honor have them headed back to seek an alternative route to meet their financial needs.
Even those who have enjoyed the thrill of the hunt and have achieved a good measure of success in the ownership and operation of their business often face burn out, perhaps as a function of age or other issues. Yes, that favorite "burned out" catch phrase basically means that they have lost some of their earlier drive, and now certain facets of the business are creating day-in and day-out frustrations (employees, demanding customers, margins, cash flow).
While getting burned out is a good reason to consider selling your business or making other lifestyle or business changes, the problem is that 9 times out of 10 it creeps up on you. Before you know it, your business isn't doing as well as it was before because you have subtly (or not so subtly!) placed less energy into its maintenance and growth, and therefore the value isn't what it used to be. Thus a key ingredient to successfully transitioning one's business and lifestyle is to preplan and have a well thought out approach as to how to best achieve your objectives.
Key Steps in Selling Your Business
- Know the realistic fair market value of your business. Consider reading Valuing Your Business the ASG Way
- Understand how that value is determined (i.e. what makes value go up or down?). What is My Business Worth? outlines how these calculations can be made and provides a glossary of key words.
- Determine the time table that will best suit your situation
- Retain a competent mergers and acquisitions specialist or business broker without paying an upfront fee!
- Manage the business well during the process of finding the right buyer
- Minimize any seller financing, tax obligations and/or obligations to stay. For more information on this topic, see Maximizing the Cash Received at Closing.
- Close the transaction and put the money in the bank for 6 months while you carefully plan and execute your investment strategy and/or estate planning.
Planning Can Improve the Purchase Price of Your Business
As with most things in life, the better you plan, the better the results. Also, unless you have sold a number of businesses during your lifetime, rather than experimenting with your own financial welfare by selling your own now, you will find that a good intermediary or business broker can add substantial value by maximizing after-tax dollars, maintaining confidentiality, minimizing seller financing and mitigating some of your litigation risk. Anyway, onward and upward with implementing your plans for your post-business years!
For an overview of the process of selling your business, consider reading
ASG Flow Chart for Mergers and Acquisitions.
