When small business owners sell their company to someone else, we call it exiting their business. Exit plan coaching is specifically designed for people who are within 3 - 5 years of wanting to sell and exit their business.
There are four main factors an exit depends on: the preparation of the business (how ready it is to be transacted), the available buyer pool, the available financing, and the expectations of the owner.
But did you know there are certain practical things you can do to prepare for that exit, increase the valuation of your business, and increase the likelihood your business will sell? Yep, and today we’re talking about four easy steps to take to sell your small business.
1. Understand the market. You want to know where your company falls within the market. There are four segments of markets where businesses are bought and sold and knowing where your small business fits determines the strategies and buyers for how you’ll execute the sale of your company.
The four main market segments are a micro-business, a small business, a mid-market business, and a large multinational corporation.
Large multinational corporations are the big companies you hear about in Forbes or The Wall Street Journal. Mid-market companies have 50 - 500 employees.
Small businesses usually have 5 - 50 employees and micro businesses are sole proprietorships and people with less than 5 employees. (Micro businesses aren’t generally bought and sold the way brokers or investment bankers transact businesses.)
As a small business broker, I focus on the small business segment. I have a main street focus, which simply focuses on businesses you would find on Main Street, America.
It’s important for business owners to know the average sale process takes 8.5 months from listing to exit so starting exit plan coaching 3 - 5 years before you’re ready to exit is ideal.
2. Eliminate the deal killers. Here’s a simple fact: 87% of small businesses don’t sell and that’s largely due to deal killers. If a deal killer exists, it can take your business’ worth from exponential to $0.
There are four main deal killers: legal (or illegal), financial, transferability, and expectations. A qualified business broker can spot the deal killers early on and eliminate them. Deal killers need to be eliminated or reduced in order to have a successful transaction.
Think of appraising a business like appraising a house: there are certain parameters that specifically qualify its value. People don’t pay for potential, they pay for historical performance. Deal killers can mean the difference between a sellable company and the 87% that are not sellable.
If a deal killer exists, it doesn’t necessarily mean your company is worth less it just means your company can’t be sold until the deal killer is overcome or resolved.
3. Drive more value. This is where I spend most of my coaching time with small business owners looking to exit. We look to drive more value in 8 ways:
e. Processes in place
f. Location of business
g. Scale of business
(Want to learn more about driving more value to your small business? Click here to read my blog on 8 ways to strategically drive more value to your company.)
4. Position your company for sale. There are four main steps to position your company for sale: assemble a deal team, build your structure, identify your buyer, and build your strategy.
Usually a deal team includes a broker that acts as a quarterback and drives the deal forward, a transaction attorney that deals with these specialized business transactions, and a specialized CPA that helps with tax advice.
Qualified business brokers have a lot of these people in their stable and have them available as needed to make sure the business gets sold.
There are three things to keep in mind when positioning your company for sale:
a. Money isn't everything. Small business owners want to cash out on their exit but money isn’t everything. You have to build your deal structure and know the terms and conditions because it’s not all about the price of business.
b. There are different strategies for different types of buyers. We’ll identify who your buyer is and create a marketing strategy to specifically go after that buyer.
c. Building your strategy ends with the small business owner and their team closing the deal.
Thinking about exiting your small business? Wondering what to do next?
Get a business valuation and don’t let anyone sugarcoat it. Some brokers have been known to over inflate the value of a business to get the listing. Make sure you get the facts and only the facts.
Then, identify and eliminate any deal killers that may exist in your business.
Next, find two to five ways you can increase your business value and implement them.
Then, hire a rockstar deal team (Hi, I’m Katie). Hire a team that can help you execute this deal competently and with integrity. You don’t get a second chance at this so make sure it’s done well and done right.
So what does exit plan coaching look like? Over six weeks, we will meet once a week to go over all of these things we discussed. That’s six weeks of 60-minute phone calls, unlimited emails and text support, analyzing financials and giving you an idea of where you’re at relative to your market. We will identify sellers’ discretionary earnings and how that relationship between business value works, optimize data tracking, and provide practical tools and resources to move you to your goal of exiting your business faster.
Want more information or to find out if you’re a good fit for the program? Book a call with me to find out if you’re a right fit for exit plan coaching today!