Up to 90% of the business owner's net worth is tied up in the business
For lack of planning approximately 75% of businesses never sell
There are 66 potential obstacles to the successful sale of a business.
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For lack of planning, approximately 75% of small businesses never sell.
Why It’s Important to Plan the Sale of Your Business
Your house will sell without planning. Even if you don't spruce it up and eliminate clutter as any good real estate agent recommends, it will eventually sell. You may not maximize the selling price by your failure to plan, but you will receive offers that are worthy of consideration. The same holds true for your used cars. Even without advance planning, you will receive offers.
Selling a business is different - much different. In fact, less than 25% of small businesses are ever sold!
Let me state that a different way - a whopping 75% of small businesses never sell!
That's right - 75% never sell! For more specific details read: Newsletter Issue #2 - Amazingly Poor Business Sales Statistics,
In my early days as a business broker, I refused to believe that statistic. I thought, "That's outrageous, that can't be true." Well, it didn't take long to figure out the statement is 100% correct, and while there are numerous reasons why, one stands out.
In our bi-weekly email newsletter series, How to Sell a Business, we identify 66 potential obstacles to the successful sale of a business. Obstacle #1 is owners' lack of realization that forward planning is necessary to successfully sell a business. There may be up to 65 more obstacles that need to be overcome! First, those obstacles need to be identified, and then they need to be addressed. And that requires planning and time.
So, that's what www.HowtoPlanandSellabusiness.com is all about - encouraging you to understand the need to plan to overcome obstacles. To do so, you need to Overcome the Power of Inertia.
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|The Power of Inertia strangles most small business owners. Typically, they become so involved in the day-to-day activities that they can't see the forest for the trees. They are so involved in details they don't take the time to see the bigger picture.|
In physics, Inertia is defined as the tendency of a body at rest to remain at rest or a body in motion to stay in motion in a straight line unless acted on by an outside force. It is commonly defined as resistance or disinclination to motion, action or change. Nothing better describes what I perceive in most small business owners. On a daily basis, they are working so hard in their business that they don't take the time to work on their business.
Those owners are in a state of Inertia. Most small business owners have the tendency to remain on their straight line and are resistant to change. A business may be somewhat successful in a state of Inertia, but it may not be saleable. There may be huge obstacles that prevent the possibility of a successful sale. The owner needs to Overcome the Power of Inertia, stepping back to see the bigger picture. As it reads in the definition of Inertia above, if he or she doesn't actively work to Overcome the Power of Inertia, the business may be knocked off its straight line course of Inertia by an outside force such as issues with health, family, macro-economy, competition, technology, etc. If that occurs and forces the need to sell the business, but the obstacles have not been identified and addressed, the business may not be saleable.
Think about this. What percentage of your personal net worth is tied up in the value of your business? For the typical owner, the small business he or she owns represents 50% to 90% of personal net worth. In most cases, the business is potentially their largest asset. But, that is only true if the business can be sold.
Remember, only 25% of small businesses ever sell! Is yours in the 25% that will sell, or is it in the 75% that won't sell? The odds are 3:1 that a business won't sell!
Now, I believe that 75% should be saleable. But, that assumes 100% of owners realize the need to plan for the sale of their business. (Based on experience, the true percentage that recognize the need to plan may be in the range of 10%.) If an owner understands the need to plan two to five years in advance of the desired exit date and executes a plan to identify and address the obstacles to a sale, those odds of 3:1 that it won't sell can be reversed to 3:1 in favor of a sale.
|With forward planning, you can significantly improve the odds of a successful sale of your business.|
It does take time to identify and address obstacles to a sale. Amongst those obstacles could be issues such as:
Theoretically, you should have started to plan your business exit strategy the day you started or acquired your business. If you haven't done so, it is never too early to start. If you delay, it may be too late. You should Overcome the Power of Inertia today and begin the process of identifying obstacles to the successful sale of your business.
|To successfully sell your business, you need to identify and overcome the obstacles you face.|
For most, selling a business is a one-time event for which they have no experience, and they are not afforded a trial run. It's an emotional, time-consuming and complex process for which the owner's financial security is at stake. Three results can occur:
1) With proper planning, significant wealth can be created
2) With inadequate planning, the business can be sold for far less than it might have otherwise
3) As happens more often than not, the business cannot be sold because the owner failed to Overcome the Power of Inertia and let the business run a downhill track for far too long
Quite frankly, most companies are not saleable because owners have unknowingly allowed obstacles to continue (and fester) in their business. The 2nd most important step in the process of planning the sale of a business is identifying the obstacles to a successful sale. That's planning step #2, only because step #1 is the owner's need to realize the importance of planning their business exit.
We have identified 66 obstacles to the successful sale of a business. To learn more, read Issue #23 - 66 Obstacles to a Successful Business Sale.
We strive to enable owners to "Overcome the Power of Inertia"; plan their business exit; improve the value of their business; and conquer the obstacles they face in selling their business.
To accomplish our mission, we have developed a series of free email newsletters to not only educate you, but to also remind you on a bi-weekly basis of the importance of "Overcoming the Power of Inertia" to occasionally "work on" rather than "work in" your business.
This 90-issue email newsletter series covers all preparatory aspects of a business sale including: