Over the years I received many questions about how I was able to successfully sell my business. While there are many components to consider, I believe it boils down to the following three keys:
1. Time — As Abraham Lincoln once said, “Give me six hours to chop down a tree and I will spend the first four hours sharpening the axe.” No truer words were ever written about selling your business. A couple of years ago, US Trust, a subsidiary of Bank of America, surveyed several hundred business owners and found that only 7% of business owners exit their business and achieve a life of significance and satisfaction beyond their business. Another interesting fact that correlates to that survey is that almost half of the business owners today would like to exit their business; however, over two-thirds of those business owners do not have an exit and/or succession plan. The saddest fact of all is that over 80% of businesses will not sell; yet 100% of business owners will exit voluntarily or involuntarily. To avoid becoming one of these statistics that exits involuntarily, a rule of thumb is to begin planning your exit and succession plan at least three years in advance and preferably five years, in advance.
2. View the Sale from the Buyer’s Eyes — A sale of your business is a true value versus risk proposition, with both buyer and seller trying to minimize risk and maximize value at the same time. Selling a business is not an easy task. One study indicated there were 66 obstacles in selling a business. While we do not have the space or time to delve into all 66 obstacles, there is one that I see time after time that most business owners struggle with. It is the old adage of working “IN” the business, versus working “ON” the business. It is a very simple statement to understand, but much more difficult to execute on a consistent basis. The book, The E-Myth Revisited by Michael E. Gerber, provides a great framework to help address this issue. In the book, Michael Gerber explains why 80% of small businesses fail, and how to ensure yours isn’t among those by building a company that is based on systems and not on the work of a single individual.
3. Have a Team of Trusted Advisors — Typically most business owners will only sell a business one time. Of course, any time that you do something for the very first time it usually does not go smoothly. Today business owners are faced with ever changing business conditions, being overwhelmed by an inordinate amount of data, and the ever-changing tax laws coupled with state and federal regulations. Therefore, you need a team of trusted advisors whose advice and counsel will help you achieve your dreams to prevent you from becoming the 93% who do not achieve a life of significance as referenced earlier. Some suggested team members depending upon transaction size should include: certified public accountant, wealth advisor, attorney, banker, tax specialist, wealth manager, and perhaps an insurance advisor.
By initially focusing on these three areas, the chances for a successful sale of your business will increase dramatically and you will then be able to enjoy your desired goals.
**This Legal Bulletin is for informational purposes only and not intended as legal advice for specific situations.