Whether you live in Australia, the USA, Canada, NZ, the UK, or South Africa, the research is the same. There is a massive amount of business owners that will be looking to retire over the coming years.
30%-40% of small business owners in Australia are now over 50 years of age, and this rate is increasing each year.
In Canada, it is estimated that within the next 15 years, more than half of the country’s current small business owners will retire.
In the US, it is estimated that 12 million baby boomers who own businesses and looking to retire in the near future are considered around 34% of the population.
Did you know that? In Australia, 66% of business owners plan to use their business as their primary source of retirement income; 43% aim to realise a lump sum benefit from the business, and 31% expect an income stream.
BUT HERE IS THE THING - 20% that get listed get sold (Exit Planning Institute USA), 80% have No Exit Plan, and 22 % Just shut shop!
12 Mistakes To Avoid in Selling Your Business
Mistake 1# Failure To Maintain Confidentiality
Mistake 2# Failure To Continue To Run Your Business
Mistake 3# Failure To Use Proper Negotiating Techniques
Mistake 4# Failure To Secure Qualified Buyers
Mistake 5# Failure To Move the Deal Along
Mistake 6# Failure To Place the Proper Value on Your Business
Mistake 7# Failure To Properly Structure the Deal
Mistake 8# Failure To Prepare Due Diligence
Mistake 9# Failure To Market the Sale
Mistake 10# Failure To Seek the Right Professional Assistance and Consultation
Mistake 11# Failure To Properly Package Your Business
Mistake 12# Failure To Control the Deal
How You Solve the 12 Mistakes:
Mistake 1# Failure To Maintain Confidentiality
Don’t have discussions unless you have signed off. This is difficult for some as it is not natural for them. However, think of it like this…it also piques curiosity.
People want things more when they can’t have them. Particularly if engaging with Business Brokers, violation of the terms can mean no commissions are payable. Although litigations can be costly, they can be enforced. Make all efforts to engage the right profession – check past deals, speak with past vendors, and ask how they will market your business and what makes them different from other brokers.
Mistake 2# Failure To Continue To Run Your Business
Some owners tend to “check out” when they have decided to sell or list their business for sale. This attitude permeates through a business and to those customers who deal with you. Maintain the Status Quo.
The average sale can take a long time (over 12 months). You need to keep your numbers working to substantiate the business and the growth prospects.
Screen all potential buyers (or get a broker/accountant to do this for you). Weed out those who are interested and attract committed buyers. Learn to say ‘No.’ They can burn your time. A good broker should do this for you.
Mistake 3# Failure To Use Proper Negotiating Techniques
Know your position. The foolish owner often represents themselves as they are conflicted and often not skilled in the nuances of a sale and the approach of valuation and substantiating a financial position.
Often, buyers are represented by professional advocates – accountants, attorneys, or buying agents. There are numerous methods of sale and negotiating techniques that are best equipped by others typically. There is also no emotion, and appropriate levers can be used during the process to get the best price and terms. Where a third party is rewarded for performance, this can work in your favour. The cost of paying such people can outweigh the potential returns from a professionally handled sale process.
Mistake 4# Failure To Secure Qualified Buyers
Facilitating a sale yourself is hindered from the onset. You can't properly qualify interested parties. Besides, it detracts from your own business or genius. A broker or accountant can pre-qualify and assess potential buyers without impinging on your time. Buyers must have funds or access to funds to complete the purchase. This won't be everyone. Push away the curious and attract the interested. You will save a lot of time.
Mistake 5# Failure To Move the Deal Along
There can be many issues during the sale process. Having someone focused on this process and continually pushing the deal along with is invaluable and more professional. Removing the roadblocks can be a skill and needs emotion removed from the equation. Lawyers and accountants can focus on the issues and remove the roadblocks, while a broker could focus on you and the business side.
Mistake 6# Failure To Place the Proper Value on Your Business
You can achieve proper value by having a professional assessment of the business. Often, owners have inflated egos and perceptions of the value of their business. A poor valuation is like telling an owner, “he has an ugly child,” however honest appraisals are necessary. Alternatively, a good third-party appraisal can add substance and justification to support a price being sought.
Having good integrity in your figures can be validated by an audit and protected by Professional Indemnity (PI) insurance.
Mistake 7# Failure To Properly Structure the Deal
Some sales require structuring to get the end or most beneficial result for the parties. Not having this knowledge can put the seller at a disadvantage. Such structures could include leveraged buy-outs, royalty payments, earn-outs, ongoing consulting agreements, or noncompete contracts. Structuring the deal in your favour is important.
Mistake 8# Failure To Prepare Due Diligence
Figures must be substantiated and defendable. An audit can help to do this. Having reliable figures instil confidence in a purchaser as this is understandably a key risk area for them. They are taking the word of others before they commit their resources.
In business dealings, I have always maintained that going through the due diligence process on several occasions really ‘sharpens your sword.’ At each event, you learn something different as different purchasers test your business. By the time you have been through two sales processes, your offer will be quite tight with no gaps in your answers.
Mistake 9# Failure To Market the Sale
When selling, be it yourself or your agent, you should commit to a marketing budget. Why? You can't sell a secret! There is no more frustrating situation than having a business sold to a party when not long afterwards, a stronger buyer offers more and better terms. By advertising and marketing the business, you stand a higher chance of meeting the best buyer at that particular time in the market. Sadly, many business owners challenge advertising because they have never really employed it effectively within their business operations.
Mistake 10# Failure To Seek the Right Professional Assistance and Consultation
The wrong advice or the wrong facilitator can be expensive if you don’t choose well. Do your homework in assessing who can best represent you. Look for a history of past sales and transactions with good outcomes in your industry sector or comparable ones. Seek to understand their process, systems, how they handle a prospect’s buying journey, and what is expected from you.
Get a match to the complexity or simplicity of your business sale. Don’t get a square peg for a round hole…someone who has had no experience in your sector or business type.
Your personality and that of the business are entwined in the DNA of your offer. Get someone to match this. High-quality legal documentation is essential. The devil is in the details, particularly with ‘clawback terms’, workouts, etc., warranty periods, terms, and any contingent (potential) liabilities. You always want your position and risk protected. Cheap is not always the best. Use a lawyer with experience in these Agreements and preferably one who has been tested before. There is nothing like real-world experience and street smarts.
Get your team to wear the same jersey. Get them together (formally or informally) because cementing relationships can never be underestimated. This is also great networking for all parties. It also means people will go the ‘extra mile for one another.
Mistake 11# Failure To Properly Package Your Business
Putting together the information that buyer needs is often sadly overlooked and is why many sales fail. Presenting the sale as an information memorandum, protected by confidentiality, with interested parties signed off shows professionalism.
Your information disclosure should have amended financials reflecting the business in light of the sale and tax minimisation. Add-backs should be included where appropriate, and special categories created and disclosed to provide the buyers with the best insight possible into the financial soundness of your business.
Sometimes, these figures produce lower profits than you expect. This is where leveraging your customer base, competitive advantages, financial history, and industry characteristics come into play. Your systemisation and processes, documentation, and efficiency all assist. These things must be illustrated to the buyer. They also assist in their understanding and transition.
Have all your licenses, certifications, certificates, titles, rental agreements, client or customer agreements, and compliances bundled and ready for viewing.
I like using a data vault to capture all the information, share it, and keep it in one place – Dropbox, etc., are good for this. Continually update this.
You must remember they are not buying history but the potential of future earnings – this is often forgotten. You have enjoyed the past. They need comfort for the future.
Mistake 12# Failure To Control the Deal
As the seller, you should have control. Quality of control extends to the quality of your professional team and the cohesive nature of your offering. As an owner, you will have to have some reliance on advice from your trusted team. Remain flexible and conversant with progress on deals. Take counsel but be able to make an effective decision when needed. Being indecisive or difficult can cause potential buyers to walk away. Don’t be flaky. When running a business, you have to make daily decisions. This is just another one—consider your options and take action. Timing can be everything.
So, you have just learned about 12 Mistakes Commonly Made in Business Exits. The value in understanding these mistakes is to counter them, prepare in advance, and avoid these mistakes through good planning, good systems and leveraging their benefits, and creating great value (being able to demonstrate this financially and in the efficiency of how the business operates).
We’ve all heard the same old business tips time and time again. Don’t check your email first thing in the morning; set realistic goals, and always be closing. We know these rules, and we know that they don’t work in the real world. So we ignore them.
1. Write Down Your Fears, Not Goals
When you write down your fears, you give them a voice and you give them shape. Put them on a piece of paper, and they don't look so scary. When you compartmentalize your fear and risk, you’ll be amazed by how much courage you have.
2. Be Wrong
When you’re wrong and have to close down a project you’ve been working on, apologize to everyone that it didn’t go the way you wanted. Then learn from the mistake and move forward.
3. Delegate Things You’re Good At
You might feel you’re only good at one or two key aspects of your business, but stop hiding from the tasks you don't enjoy. Yes, delegation is key, but to delegate effectively you need to understand all aspects of your business.
4. Be Strategically Lazy and Find Your Multiplier
Find ways to be lazy by piggybacking on other opportunities, ideas, or trends. This will allow you to keep your freedom to do what you want.
5. Time Is Not Money
You can always decide to make more money, but you cannot choose to make more time. Time is your most valuable asset, and until you choose to treat it with value, it will continue to be worthless.
Create your plan by doing these six items:
1. Define Your Target Market – who they were previously, in your local or selling area and marketing opportunities with them.
2. Write it Down – write who you are targeting and what are their emotional triggers.
3. Identify Your Value Proposition – why a customer chooses you. Are you unique with your product or service? If in doubt, ask your customers.
4. Create Key Messages – these contain the key benefits you offer that the competition does not and research the landscape. Integrate this into PPC strategies, blogs, and other market messages.
5. Scope Out the Competition – do a (Strength, Weakness, Opportunity, and Threat (SWOT) analysis of your competition. Check their internet presence, ad campaigns, and use comparative software to analyze them. Talk to customers about their choices.
6. Check Out Your Digital Market – use keyword searches with Google Keyword Tool to generate relevant keyword lists to find the popular search terms around your keywords. Integrate the most popular words in your campaigns to trigger the search engines
The Digital Marketing PROFIT ACCELERATION FORMULA – Business Owner Breakthroughs
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