Selling your business is the single most important transaction of a business owner’s life. Recent data shows that while 50% to 90% of a business owner’s net worth is tied up in their business, about 75% of them are unable to convert their businesses to cash due to something as simple as improper planning. It’s not something you enter into lightly.
This is why it’s so crucial to determine and outline an effective exit strategy well in advance of taking your business to market.
Mapping out a successful strategy to exit your business can help:
- Avoid or minimize taxes
- Minimize risk during the transaction
- Lead to a higher valuation
There are many potholes that can come up during the sale of a business. These are things that slow down a deal, derail it or sink it altogether. Given that only 25% of businesses that go to market are actually sold, potholes are bound to arise during the process – and you don’t want yours to be impacted by one of them.
Want to learn more about navigating around the potholes? Check out my latest video.
Three Things to Remember When Selling Your Business
There is a long list of things that can potentially come up, but three big ones that could potentially lead to lower valuation are:
- Stagnant revenues over several years without a path to growth
- Lack of customer diversification, namely revenues tied up in one or two clients
- The likelihood that key employees might leave with the sale of a business
A solid exit strategy should seek to have these potholes filled a solid three to five years ahead of going to market. This will not only help maximize the value of your company, but also reduce the risk, anxiety and frustration that accompanies this process.
Unfortunately, business owners don’t often see these issues as “potholes” because they aren’t able to see their business from a buyer’s perspective. What a business owner sees as a special or unusual aspect of a business can raise buyers’ eyebrows. The easier it is for the buyer to understand a clear story, the greater the likelihood of a higher valuation and smoother transaction.
This is why it’s vital to seek expert guidance from someone who’s been on both sides of the transaction. With 20+ years of finance experience, including a successful track record in the M&A arena for an acquisitive family business and a specialization in exit strategy coaching, I can help position your business for maximum valuation and make the sales process smoother.
If you’re building out an exit strategy or are planning on selling your business, reach out to me at firstname.lastname@example.org or 917-599-8230 or book a 30-minute call here: https://calendly.com/mmalanga/30min.
Megan Malanga is a Certified FocalPoint Business and Executive Coach, and is based in Springfield, New Jersey. With a passion for small business, Megan serves as a trusted advisor who is energetic, objective, and curious. Additionally, she acts an accountability partner, holding business owners and executives accountable, thereby helping them reach their goals faster than they would on their own.
With an M.B.A. from Drexel University in Philadelphia, PA, and a bachelor’s degree in Finance from Virginia Tech, Megan is an avid athlete. She participates in endurance sports, including marathons, half-marathons, and triathlons.