Here are the traits, strategies, and experiences that set apart those who successfully sell their businesses from those who merely dream of doing so. Will 2024 be the year you make the successful business exit?
Successful Sellers:
- Expert Guidance: Successful business sellers understand the need for expert advice and assistance. They surround themselves with professionals who specialize in mergers and acquisitions, legalities, and financial matters, ensuring they navigate the process effectively.
- Patience and Preparation: They know that the sale process is complicated and takes time. These sellers are not in a rush; they invest time in preparing their business for sale, from financial statements to operational efficiency.
- A Playbook for Success: Success is no accident. They have a clear plan, set goals, and follow a well-structured strategy that guides them through the selling process.
- Self-Reflection: These sellers are not blind to the flaws in their business or in themselves as leaders. They critically evaluate their business’s weaknesses and address them, becoming more attractive to potential buyers.
- Financial Prudence: They’ve not only made a profit but have also been diligent in paying taxes. This financial responsibility adds credibility to their business and simplifies the due diligence process.
- Healthy Balance Sheet: A strong balance sheet is attractive to buyers. Successful sellers have maintained a healthy financial position, making their business a more appealing investment opportunity.
- Maximizing Attractiveness: They understand what makes their business more attractive to buyers and execute on it. This could involve improving operations, expanding the customer base, or enhancing the value proposition to potential buyers.
Unsuccessful Dreamers:
- Overestimating Value: Unsuccessful sellers may believe that their many years in business entitle them to exorbitant offers. They assume potential buyers will throw ridiculous amounts of money at them simply because of the business’s potential. This unrealistic valuation can deter serious buyers.
- Misunderstanding Transition: Some sellers mistakenly assume that buyers will take over management on day one, allowing them to head straight to the beach. However, a successful transition usually involves a period of overlap and collaboration to ensure a smooth change in leadership.
- Fudging Financials: Unsuccessful sellers may claim they make a ton of money despite tax returns showing a loss. This lack of transparency can deter buyers and result in lost trust during due diligence.
- Nostalgia-Driven Pricing: Some sellers are anchored to the price a friend offered to buy the business for back in the past. This outdated reference point doesn’t reflect the current market conditions or the true value of the business.
- Irrational Partner Demands: Unrealistic demands from partners can derail a sale. Justifying a selling price of $2 million because there are two partners, and they each want $1 million at closing.