Planning to Sell? How to Answer THE Most Important Question

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At some point in the process of selling your business, a prospective buyer will ask you – usually quite casually – “Why do you want to sell your business?” As a business advisor to SMB owners, I have personally seen these eight seemingly innocuous words derail more deals than any others.

Why?  Although THE question might seem to have a straightforward answer it needs to be more strategic than you might think.  Buyers want to know where you are at in the selling process, what your motivation is and how likely and willing you are to stay on and if you already have one foot out the door.

Obviously you don’t want to lie, but there is a right and wrong way to answer THE question. Answers like “I want to slow down a bit” or “I want to travel” or “we’ve got a baby on the way and I want to spend more time at home” communicate to a potential buyer that you plan on winding down when they take over.

Knowing that what they want to hear and how to provide them with an answer could mean the difference between selling your business and a possible derailment of the deal.

I have outlined below a few suggested responses to THE question which will allay their fears that you plan to sell your business and move on as well as solidify help them realize the potential locked inside your business.  I have outlined my tips based on your age as age does play a role in the selling of your businesses.

If you’re under 40, you clearly aren’t ready to “retire” so you need to communicate that you see an upside in merging your business with theirs:

“In order for us to get to the next level, we need to find a partner with more <insert sales people, distribution, geographic reach, capital or whatever the partner brings to the table>.”

If you’re between 40-55 years old, most people will understand the need to shore up your personal balance sheet:

“I’ve reached a time in my life where I want to create some liquidity from the value I’ve created so far, and at the same time I want to find a partner who can help us get to the next level.”

If you’re over 55, you can start to talk about retirement, but you want to make sure you communicate that you still have lots of energy and passion for your business.

“I’m at a stage where I need to start thinking about retirement. It’s a long way off yet, but I want to be proactive.”

Rehearse your answer to THE question so it becomes a natural response when a potential buyer inevitably asks you THE question.

How About You?
I am always interested in hearing from you. Have you been asked THE question? Do you have any other suggestions for responses that you have personally tried?

I look forward to hearing your stories in the comments below.


How To Get The Most For Your Company

 

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This past week, I hosted an event featuring a presentation from Ross Campbell and Stuart Morley, Managing Directors of the MBO Group Inc., entitled “How to get the most for your company – a buyers perspective”.   The presentation highlighted some of the issues that drive the valuation of a company from a buyer’s perspective.

Whether you are planning on selling your business in the near future or 5, 10 or even 15 years into the future, you’ll need to prepare your business for sale and part of that is assessing and evaluating your business as it stands today.  As a business advisor to SMB owners, I spend a great deal of time talking about potential acquisitions and I’d like to share with you three tips to help you set the groundwork for getting the best value for your business when it comes time to sell.

  1. Start the dialogue
    Spend some time thinking about who might be interested in buying your business.  Think about local competitors, outside peers and your current management.  Once you’ve identified an interested party, open up the lines of communication.  
  2. Make yourself obsolete
    Most entrepreneurs have direct involvement with their key customers and while this is great while you own the business, when you are trying to sell it, buyers will be worried about losing some or all of the customers if they were to buy your business. So create a framework for your business in which you become obsolete so that a new buyer could run your business without you at the helm.
  3. Make sure your business follows documented processes
    Part of growing your business and allowing for you to become obsolete is making sure your employees know what to do. Document all your processes so that you allow your employees to function without you and make decisions that reflect your values and best practices.  Document everything from the process of how to send emails to accounts payable.

How About You?

I am always interested in hearing your stories. Are you considering selling your business?  Have you thought about what you’ll say if a company calls asking you if your business is for sale?

I look forward to hearing your stories in the comments below.


Does Your Business Have Curb Appeal?

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Advice from an Expert Business Advisor

No matter what business you own, if you are considering buying it you’ll need to make sure it has “curb appeal”.  Like your house, your business projects an image to potential buyers. When they come to see your business for the first time, your can either attract a buyer to your business or cause them to walk away.

With almost 40 years of business experience and the last decade providing coaching and business advice to small and medium sized businesses, I would like to share with you a three-step plan to improve your curb appeal and help you prepare your business to obtain the best value in the market.

1. Fix Your Leaky Faucets

Make sure your human resources policies are at least as stringent as those of the company you hope will buy your business. Some basics to have in place:

•    A written policy making it clear you forbid any form of harassment or discrimination;
•    A written letter of employment for each staff member;
•    A written description of your bonus system;
•    Written policies for employee expenses, travel and benefits.

2. Assemble Your Binder

When a potential buyer looks at your company, he wants to see that you have your business information in order.  Documenting your office procedures, core processes, and other intellectual capital can help you attract more bidders and a higher price for your company, while also lowering the chance of the deal falling apart during diligence.

If you want to attract a buyer one day, your business needs a binder with instructions for basic functions, such as:

  • Opening up in the morning and closing down at night;
  • Forms and step-by-step instructions for routine tasks;
  • Templates for key documents;
  • Emergency numbers for service providers;
  • Billing procedures for customers.
  • How your company is positioned in the market and your marketing tools.

3. Document Your Intangibles
Intangibles for house buying might include: Is the house near a good school or daycare? What kind of neighbourhood is it?  What kind of commute are you looking at to get to work?

Your business also has intangible, often intellectual, assets that a potential buyer needs to be made aware of, such as:

  • Proprietary research you’ve conducted;
  • A formula for acquiring new customers;
  • Criteria you use to evaluate a potential new location;
  • Your unique approach to satisfying a customer.

As with selling a house, your company’s curb appeal can go a long way toward closing a deal.

How About You?
Are you a SMB owner considering selling, if so, how have you prepared your business for sale?

I look forward to hearing your stories in the comments below.


Is Now the Time To Sell Your Business? Advice from the SMB Experts

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Whether you own a small or medium business or a consultancy company, at some point you might consider whether you should sell your business and if so, you’ll want to know what it’s worth.

My name is Philip Spensieri and together with my colleague John Womack, we have created this blog to field questions and provide advice to SMB owners who are considering their options, next steps and exit strategies.

With more than 30 years providing financial and tax advice and the last 9 years providing coaching and business advice to small and medium sized businesses, we’d like to kick-off our blog this week by sharing with you our list of the top reasons to consider when determining if this is the right time for you to sell your business.

1. You’re less interested in fighting the good fight

A lot of business owners took the Great Recession in the teeth. If you’ve got your business stabilized and the prospect of possibly having to fight through another recession leaves you panic-stricken, it could be time for you to get out.

2. The worst is behind you

Let’s say you were mentally ready to consider selling a few years ago and then 2008 hit, and in 2009 you made cuts and adjustments, and now you’re seeing some profit and revenue growth.  With your numbers going in the right direction, now might be just the right time to make your move.

3. The tax man is coming

Governments around the world are looking for money to fund the cost of an aging population. At some point this will mean increased taxes.

4. The coming glut

As a business owner, demographics are not on your side.  As the baby boomers start to retire in droves, we’re going to have a glut of small businesses coming on the market. That’s great if you’re buying; but if you’re a seller, you may want to avoid the flood and head for higher ground now.

In the coming weeks, we look forward to sharing some advice, tips and industry insights on issues to consider before you sell your business.

How About You?
Are you a SMB owner considering selling, if so, when do you think it is the right time to sell?
We look forward to hearing your stories in the comments below.


Welcome!

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