How to Start Overcoming Obstacles to a Business Sale
In the last issue (#29), we supplied short Synopses of Numbers 56 - 66 of 66 Obstacles to a Successful Business Sale. This issue will discuss How to Start Overcoming Obstacles to a Business Sale.
A Favorite Famous Quote
"The way to get started is to quit talking
and begin doing." Walt Disney
How to Start Overcoming Obstacles to a Business Sale
The previous seven newsletters identified and discussed 66 potential obstacles to a business sale. That can be intimidating and might result in owners throwing up their hands and saying, "I don't know where or how to start dealing with obstacles." In this newsletter we will suggest one approach to consider.
To begin identifying obstacles, it's important to understand that buyers want to minimize risk.
Commit to working on your business
The first obstacle, the overriding obstacle that must be addressed, is the Business Owner's Failure to Plan for a Sale (Issue #56). To overcome this obstacle, you need to make a mental adjustment. You need to commit to spending some time working on your business rather than working in your business. You need to commit to occasionally stepping back from your business to see it as a buyer might view it.
Identify your obstacles
To successfully sell your business, you must be prepared to successfully address a serious buyer's primary motive - risk minimization. When a prospective buyer initially starts looking to acquire a business, risk minimization is not their primary motivation. However, once a buyer becomes serious and zeroes in on a particular business, risk minimization is right at the top of the motivations. Many of the obstacles to a potential business sale are really risk factors for buyers. When you overcome the obstacles, you also minimize a buyer's risks. There's also another benefit to overcoming obstacles. Doing so will not only make your business saleable, it will also increase your profitability, allowing you to have more take-home pay during the period you own the business. That's why it is never too early to get started.
Of the 66 obstacles, some are simply common mistakes that sellers make because of lack of knowledge. Once sellers understand the nature of some obstacles, it can be relatively easy to make the mental adjustment to avoid those mistakes. Some require your personal introspection to determine your personal goals. But other obstacles require more time to tackle and may require changes to various aspects of your business. Those are the important obstacles to identify as soon as possible so you can begin making the requisite changes.
Learn the realistic value of your business
After overcoming the first obstacle by making the commitment to work on your business and start the planning process, there are two more preliminary steps that need to be accomplished to implement a plan to overcome obstacles. First, you need to have a realistic idea as to the current value of your business. And second, you need to identify the obstacles your business faces that you need to focus on. It's not likely you have 66 obstacles to overcome, but you might reasonably face 5 to 10, possibly more.
Qualified business brokers are a great resource
Here's how you can kill two birds with one stone. Develop a relationship with a qualified business broker who can help you: 1) understand the current value of your business (and importantly, how and why it is valued that way); 2) identify obstacles to a potential sale of your business; and 3) identify opportunities for improvement to increase the value of your business. Business brokers will provide a free initial consultation to discuss your business and many will provide no-charge, no-obligation evaluations of businesses to provide their professional feedback on valuations, obstacles and opportunities to increase value. Why do business brokers provide no-charge, no-obligation evaluations? They are interested in developing a long-term relationship so when the timing is right for you to sell the business, you will remember and trust them with that responsibility.
CAUTION! Find a good business broker
So a good first step is to call a business broker. But, CAUTION is needed. Before doing that, you should read this article: Issue #77 - 10 Considerations for Choosing an Intermediary. There are a wide range of capabilities and professionalism amongst business brokers and merger & acquisition (M&A) intermediaries. In fact, Choosing the Wrong Intermediary (Issue #76) is the 20th obstacle in our list of 66 obstacles. For even more in-depth information, read our Special Report: Insider Secrets to Selling Your Business - Business Broker Best Practices and Selection Criteria. Once you make the commitment to planning your business exit, the last thing you want to do is become aligned with the wrong type of intermediary. Some are good, some not so good. It's important to get off to a solid start.
Business brokers provide an opinion of value
In performing an evaluation, business brokers will provide an opinion of value. That is a necessary aspect of business exit planning. You need to know where you are to plan where you are going. Having a realistic estimate of your business' value will help you understand the disparity between your longer-term personal financial goals and your current personal financial situation. It's always important to be realistic and sometimes it is necessary to adjust your longer-term personal financial goals to more achievable ambitions. Or, since you recognize there is a gap to be filled, sometimes business improvement changes can resolve the disparity over time.
Business brokers can also help you identify obstacles to a successful business sale
In the course of their evaluation, business brokers can also help you identify obstacles to a successful business sale. Some obstacles can preclude the possibility of a successful sale. Nothing can be more important than attending to those obstacles. It would be a good idea to discuss as many of the 66 obstacles that apply to you - one by one - with your chosen business broker and obtain their feedback as to steps that can be taken to overcome obstacles that exist in your business.
So, how can you start .....