Seek Advice
By now you should have determined your resolve to sell. This is important since you need to be able to remove all emotion from the transaction. It’s hard, but you need to be detached from your business: Get yourself into a selling mindset.
At this point, it’s important that you seek advice from others who can help you think through the various issues. Talk to your family, as well as your financial and business advisers. Confronting these issues and performing this self-examination will help you determine what you really want from the sale of your business.
You are now ready to prepare your final list, utilizing input and insight from others. This list should include your goals, ranked in order of importance to you and your family. What is of most importance? What is of least importance? You want to list them all, but it is vital that you rank them from most important to least significant. Once your goals are sorted and ranked, your next step is to develop a plan to help you achieve them.
Develop a Strategy
Just as you needed a plan when you started or acquired the business, you’ll need one to sell it too. You will need to make a commitment to devote considerable time and effort to develop your strategy for achieving your goals. Of course, your primary objective is to find the best buyer for your business and to maximize the selling price. Your strategy should be based on the priorities set forth in your list of goals and should include careful consideration of price, timing and opportunity.
The sale of your business is perhaps the most important economic decision you will ever face. It must command the appropriate allocation of your time and resources, as any major project demands. If you find that you are reluctant or unwilling to commit these resources, or if your goals don’t seem worth the effort, then you should reconsider your decision to sell your business.
Timing Is Everything
Just as "location, location, location" is the old axiom when it comes to launching a successful enterprise, "timing, timing, timing" is the truism for selling your business.
Ask yourself: Is this a good time to sell a small business? Here’s what a few experts have to say on that topic:
According to Cynthia Flash, in the Seattle Times, "When the economy is turning down and people are worried about their jobs or are being downsized, they’re looking for alternatives. Faced with the poor economy, many are turning to owning their own business in place of the jobs they no longer have, and there are many to choose from."International Franchise Association President Don DeBolt said, "These new buyers have been hammered by the markets over the last 18 months. This way, they can have control over investment outcomes."
For the same reason, many high-tech industry workers and retirees are looking for alternatives and are turning to ownership of small businesses.
Recently, the New York Times ran an article, "To Get a Job, Become a Boss," in which writer Sharon McDonnell wrote, "A tight job market is one reason many individuals who have been laid off from company jobs are turning to owning their own business." One person, for example, intended to become an airline pilot, but because of the decline in the industry, he had to abandon that plan. He opened a small business instead. It is estimated that corporate downsizing, layoffs and a slow economy have accounted for a 50 percent increase in inquiries concerning franchising operations, in the last year alone.
Moreover, some potential buyers are not interested in single-store operations. A recent article in the Atlanta Journal Constitution, by Caroline Lynch, was titled: "Single Store Mom-and-Pop Franchisees Give Way to Wealthy Professionals." According to the writer, "The number of multiple-unit franchisees who picked up savvy business skills in other industries is growing as former executives and financial employees seek refuge in the franchising world amid an ongoing economic and market downturn." These enterprising executives have the financial resources to buy existing small businesses and bundle them together so that they own a small group of stores.
Many potential buyers for small businesses are motivated to find a quality of life offered only in smaller communities. They want to get their families out of the decaying social environment of the metropolitan areas and find a safer place for them to raise their children. Furthermore, they want to take control of their own personal career destiny and financial investment. Some are motivated to make the change to owning a small business because they no longer want to continue the long-distance traveling that may be part of their current positions. Finally, quite a number of financially qualified potential buyers have become so because of a reassessment of priorities following the upheaval of September 11, 2001. Many people changed the way they viewed their lives and considered earnings potential in a whole new light following this national tragedy. As a consequence, many priorities were reset.
Your Window Of Opportunity
What all this means it that there has never been a time in the history of our country that so many financially qualified individuals have been looking for career changes that involve the ownership of small businesses. A survey of nationwide business activity shows that many small business owners are ‘seizing the day’ and taking advantage of the window of opportunity offered by today’s favorable marketplace. It would seem that the window is open wide for the business owner who is ready to sell. According to USA Today, 20 percent of all small businesses with nine or fewer employees are currently for sale. The newspaper also reports that one out of every five sells in the five-to-nine-employee category, and one out of every six sells in the four-or-fewer-employee category. It would seem prudent for the auto parts store owner who desires to sell his or her business to do so "while the iron is hot."
Hire Good Help
There is an old saying that advises, "A physician who performs surgery on himself has a fool for a patient." Experience shows that the same could be said about a business owner who attempts to sell his or her own business completely on his own.
Selling a business is a very complex and time-consuming activity. You will encounter many legal, tax, accounting and regulatory issues. Additionally, there exists the challenge of finding the appropriate qualified buyer, maintaining confidentiality and then negotiating and structuring the transaction for the most advantageous outcome possible for you. Don’t try this alone. Prepare to hire good help.
Reviewing The Process
So far, these articles have you prepared you to take the path to selling your business. Here is a recap of some of the things you should be doing before you take the plunge:
- Consider all of the factors that influence your decision to sell;
- Decide if you are ready to sell and then make a firm commitment to that decision;
- Set and prioritize your goals for the sale of the business;
- Specifically identify the outcome you expect to achieve by selling;
- Seek helpful and meaningful advice from others; and
- Develop a strategy that will carry you painlessly through the process of the sale.
Be cognizant of the wide-open window of opportunity that exists in today’s marketplace. Once the most important decision of your professional life has been made, you will be ready to move forward in the process of finding a qualified buyer.
In next month’s article, Tom will help you plan for the next steps and tell you how to find and enlist the help of those experts that will minimize the stress and maximize the profits for you.
