The shortened version of this blog was published in the Wichita Eagle on Thursday, February 18, 2016 in the Business Perspectives
Knowing what you have is key when selling your business
As a small business owner, you have worked long and hard to reach the point that you are ready to sell your business and move to the next big adventure.
But just exactly what are you selling? Is it a job, an investment opportunity, a retirement plan, a testimonial, a labor of love or a hobby? Knowing the answer to this can be key when the time comes.
Most small business owners work hard in their businesses. In most cases, the underlying long-term motivation for owning and operating a business is simple, money. Without it nothing else is possible, our house payment, groceries, retirement plan, investments, slush funds, family forecasting, all hinge around having money. As individuals our wants, needs and desires are unique. They are also relative to our perspective of life.
The same can be said about the value of a business being sold. The value of a business is relative to the perspective of the market and the selling price that the market will allow.
Unfortunately, this does not always correlate to the opinions, wants and needs of the seller.
Bizbuysell.com is the largest marketing website for small businesses in the world. In 2015, the average business that sold on this site sold for $199,000. Locally the value was $140,000 but this is probably skewed since only 3 sales in Wichita were reported to the site.
At this price, most buyers are buying a job, the ability to make a living, a paycheck, control over their own destiny, a sense of self-worth, satisfying that entrepreneurial bug. The business may sell for a fair price and in some cases, a premium but just because the seller wants it or thinks it should happen, does not mean it will. Knowing what you have can be key in your long term financial planning.
If selling your business is your retirement plan, then it is even more essential that you know what you have years in advance. Knowing what you have can also help you to know if or when the time is right to sell.
Every business should be built to sell from the day it is conceived. Since this rarely happens, a business owner should visit with a business transfer specialist at least 3 – 5 years in advance of the time they want to sell.
Learn their opinions on the value of the business and what can be done now, to make it more attractive to a potential buyer, later.
These business transfer specialists can be business brokers, consultants, attorneys, accountants, bankers or other trusted competent advisors. Wichita is blessed to have a nice population of professionals who can assist. Wichita is also cursed by those who profess themselves as experts when they really aren’t. They never received any initial training, much less on-going education. Most of them mean well, they just don’t know any better. Wichita can also be targeted firms who sell valuations and promises. They deliver some really impressive reports but few results. Many can make a nice sales pitch, teach a class, conduct a seminar or give a presentation but few can consistently deliver. You have worked long and hard to build your business. You need to spend time checking into the person who is going to help you get it ready to sell. No matter who you work with, you owe it to yourself, your family and your business to check at least two references.
In addition to know what the potential selling price could be it is important to know other factors that could affect the salability of your business. Is my business turnkey? Are my proprietary assets (tangible and intangible) protected and transferable? Is the business so reliant on the owner that a possible buyer will be scared off? Should I be concerned if I’m a C-Corp? What will be the tax consequences?
In sales, it is best to sell a known product, one that you know and understand. The same applies to your business. Knowing what you have and understanding the consequences of selling, can be key in allowing you to move forward in life.
Why would you want it any other way?
About the Author:
Steve Fischer, is a Certified Business Intermediary of the International Business Brokers Association and Office Owner of VR Business Brokers in Wichita. He can be reached at 316-250-5962 or firstname.lastname@example.org.