Why You Should Sell Your Business Now

As a business owner, you might be dreaming of the day when you sell your business and ride (or sail) off into the sunset. That dream may be more difficult to achieve than you realize. Historically, only 25 percent of businesses up for sale actually sell. The odds could get worse in the Exit Bubble, when millions of baby boomer business owners exit their businesses over the next decade.  

Business sales go bad for a variety of reasons, but sellers can improve their odds of success by understanding the top five reasons business sales go bad.

1. Sellers are unsure what comes next for them. If you are like most business owners, you live and breathe your business. What will happen when you no longer run your business? How will you fill your time? You might assume you will have time to figure this out after you sell the business. Unfortunately, not having a clear vision for life after the sale is a common reason a business sale goes bad. The fear of the unknown can be overwhelming, leading you to stay in your comfort zone of running the business. Take the time early in the process to create a vision of what comes next for you. It will minimize the emotional impact of leaving your business and increase the odds of a successful sale.
2. Sellers don’t prepare their business for sale. Before you sell a house, you want to make it attractive to buyers in order to increase your odds of selling at a good price. You might repair the deck, paint the outside and even plant flowers. The same holds true when you sell a business, but the process is much longer. Sellers who don’t step back and view their business through the eyes of a buyer may be surprised by issues that buyers identify in due diligence. Those issues could result in significant price reductions or even failed transactions. Identifying potential value detractors and implementing changes can take several months to several years to complete. Start now to ensure you are prepared when the time comes.
3. Sellers keep skeletons in the closet. It is human nature to avoid talking about flaws or weaknesses in our companies and us. When it comes to selling your company, it’s critical that you disclose any potential negatives as early as possible. Once you move into due diligence with a single buyer, the buyer’s goal is to decrease the price. If you bring all of your skeletons out of the closet while there are multiple bidders, you’re in a better negotiating position. Surprises in diligence are avoidable if you spend time preparing your business as discussed above.
4. Sellers assume the initial price is final. Getting a letter of intent or initial offer from a buyer is exciting, especially when the offer meets your financial goals. Don’t start spending those proceeds yet. Even though it feels like you’re on the final stretch, the buyer has just come off the starting blocks. The buyer has a limited time to learn everything about your business and ensure he pays the lowest price possible. Due diligence provides the buyer the opportunity to find reasons to reduce the purchase price. If you have prepared your business for sale and disclosed the skeletons, you can minimize potential adjustments to the purchase price.
5. Sellers succumb to deal fatigue. Selling your business can take months or even years. Sellers are often surprised by how in-depth due diligence can be. It is easy to become tired and defensive when the buyer is questioning everything you do and say. It can feel like you’re being attacked, and many sellers become drained and walk away from the transaction. You can overcome deal fatigue by being prepared and knowing what to expect in the sale process. Understanding the challenges of what you will be facing during the sale process is critical to getting across the finish line.

Selling a business can be a challenging and emotional process. To ensure you are in the 25 percent of successful sales, prepare yourself, prepare your business and know what to expect during the sale process.

Tensie Homan is a CPA, author of Beat the Exit Bubble, and an experienced mergers and acquisition professional. Over the last 20 years, including nine years as a partner at KPMG LLP, she performed due diligence on more than 200 companies in the U.S. and internationally. In 2013, Homan co-founded ExitBubble.com with Dan Meyer – an online independent resource for business owners preparing to exit their business. Learn more about Homan at ExitBubble.com.