Having an honest conversation is one of those topics most people avoid for fear of what we know and don’t know. No one wants to be thought of as less than a success. Too many business owners continue to grind through the day-to-day and ‘worry about it later’. Head-in-the-sand is not a favorable strategy. One piece of advice I heard decades ago was, “there are only two things you control in life, how you prepare for ‘X’ and how you respond to ‘Y’.” Depending on who’s statistics you choose to believe, over 50% or over 80% of business owners will never sell or won’t be able to sell their life’s work. Let’s look at why. Truth without grace is mean. Grace without truth is meaningless.

I’ll ask the uncomfortable questions: Is your business a hobby, a lifestyle generator or just a self-employed job? Why are there so many articles, podcasts, and YouTube videos on the why, how and what aimed at selling your business? According to the SBA* there are 2.4 million of the 33 million small to medium enterprises that have achieved $1 million in revenue; 4% of those ever achieve $10MM. It’s more difficult to grow your business to $5MM than it is to operate a $50MM enterprise day-to-day.

Many business owners struggle with the thought of selling their life’s work. The rush of emotions, the thoughts of what’s next or the dark demons of doubt crash successful minds. From tying your identity to the business, relying on the business for personal income to the overwhelming feeling of what may come during and after selling your business. We often ask ourselves as business owners, “How do I replace myself?” “I gave birth to this business.” And “the business wouldn’t exist without me.” We’ve been there and felt the very same thing. Here’s what we found out once we had a conversation that changed our entire trajectory. Let’s look at the reasons ‘why’ you don’t or won’t prepare for the sale of your business:

Emotional Attachment. Many business owners are emotionally attached to their business, and why wouldn’t we be attached. We took the germ of an idea and made it into something that provided for your family and employees. Your identity can become wrapped up in the business. ‘I am the business,’ and ‘the business wouldn’t exist without me.’ If you’re honest with yourself, what you’re truly saying is, “I find it difficult to separate me from my business…I’ve given years of blood, sweat, tears and cash…and I’m struggling to know what my next move will look like…” fear sets in, procrastination sets in, and you go on to the next fire that’s erupted so you can solve it and feel like the hero. Been there, done that, got the tee shirt and was left for dead on a beach in Mexico. How long can you keep this up?

Lack of Knowledge. Many business owners lack awareness of the complexity of the selling  process. It’s the humble business owner who can overcome this reason, submit their ego and conclude they don’t know everything. Selling your life’s work is a complex and very nuanced undertaking involving legal, tax and financial advisors in your underwear. Sometimes it can feel like a never-ending proctology exam. Some believe we’re all gonna’ yell gotcha and embarrass the hell outta you. We’re trying to help you! Whether it’s a wakeup call to get your shit together, or you finally listen to what’s being said and do something positive for you and your family’s future. Find an advisor and a process. Follow the process!

Financial Dependence. Facing the reality of a business’s true value is financial dependence. When some business owners truly dig into their business, they realize what they have is a self-employed job unfortunately. Other business owners don’t want to face the reality their business provides a lifestyle but outside of that very little is left. Relying heavily on the business for your personal income is one of the most slippery slopes a business owner can face. Many continue that roller coaster as they’ve done for far too long to course correct. How do you imagine a future without the monetary expectations you’ve given your family? It’s not too late to course correct, and we’ve helped owners in this situation turn it around.

Unrealistic Valuation. Many business owners are not financially ready as they have significant debt, they personally rely on the income or simply believe they will be able to operate the business indefinitely. The #1 reason why businesses don’t sell is the unrealistic expectation of what the business is worth. Private equity, investors and strategics wake up every day to buy business. They know the financial model that works for their investors to achieve IRR of 30% and more. Far too many business owners believe their business is worth X-times their revenue, ‘because that’s what Joe got’. Joe ain’t telling the truth either…EGOs like speed kills. No two businesses are alike and each businesses value are not alike, even if you’re in the same industry. We’ve seen far too many owners walk away because they thought they could get X and didn’t. Sadly, many of them today still haven’t.

Nose Deaf. A combination of all these reasons and lacking a plan for their future doesn’t help. You control the plan and the preparation. Why wouldn’t you prepare with the same urgency and passion you started the business with? Whether there’s no succession plan today or it’s a failure to consider how to transition from where you are today to new leadership of ‘my baby’, failing to develop a plan to transition to some iteration of new management leaves your business unprepared, unattractive and vulnerable. Buyers pour through thousands of business teasers every year to choose 2-3 like yours for their future potential not existing circumstances. Can you get out of your way long enough to allow a team of professionals guide you to generational wealth? Will you?

FUD. Fear, uncertainty and doubt leaves every person stuck including business owners…so if I do nothing, then nothing will change. You couldn’t be out of your mind any more with that thought. How would you respond to one of your employees if they called in one morning and told you, “I’m stuck, and I can’t come to work today…I don’t know what to do.” After your mini meltdown, you’d probably crawl up their ass over the phone… realizing they’d text you, because they wouldn’t dare listen to your steaming voice over the phone. Uncertainty over what to do after selling your life’s work from retirement, a new career, time with family, etc. can and will lead to procrastination. There’s hundreds of reasons and excuses to feel FUD!

 

“Some people make things happen, some watch things happen and others wonder what happened.” – Eleanor Roosevelt

 

Unfortunately, only a small proportion of business owners plan their exits giving this major life decision the thought and careful consideration it deserves. You’re used to being the answer man, the man with the plan, confidence and speed – a natural bias towards making things happen. Now it’s up to you to develop a plan, fine-tune then implement that plan. It’s not the time to dive right in and figure things out later. At JSP, we’re that stake-in-the-ground to be a sounding board helping you craft that plan, sharing the lessons we learned along the way saving you time, the stress of going it alone and hundreds of thousands to millions of dollars. You really want to leave that on the table?

What we learned once we got out of our own way was the lack of preparation extended the time frame of our own sale, reduced the cash we put in your pocket, and lowered the chances of a successful transaction. We only made that mistake once. You don’t have to make the same mistakes, unless you just want to be stubborn.

Every sale and exit is different, and each one must be planned. While many advisors will tell you there is no templated process you can follow in preparation for your business sale. We will tell you the disciplines are absolutely the same, the principles are finite, and the preferences are infinite. The preparation is the most important in our opinion. Not unlike preparing to renovate a house, the overall finished product is a direct result to how much preparation went into the project. The smoothest cases we’ve been invited to advise were the ones who prepared, who communicated with honesty and clarity and approached the buyers with a humble attitude. The JSP sales process is simple, practical and powerful. It is not easy and it  involves a number of steps, prioritizing those steps, and then taking action on those steps.

Time is your greatest currency, and it can never be regenerated. You can spend your time, or you can invest your time. We are looking for business owners who are willing to invest time together to achieve a generational wealth outcome. If that’s not you, then read no further.

It doesn’t matter where you are in your business’ journey, we encourage you to be honest with us concerning how much time you are willing to invest in preparing your business for sale. We can work with you easily when you shoot straight with us. If you are not willing or able to prepare your greatest investment for sale, say so. We can present businesses for sale in urgent or distressed situations and have. Shoot straight about your expectations, the condition of your business, and your level of willing preparation. We will eventually learn a lot about you and the state of your business in time. It’s best to be candid with us to build a relationship of mutual trust throughout the process. Without trust in your advisors and us in you, ensuring a successful transaction is unlikely.

NOTE: we’re direct – we don’t sugar coat anything and we don’t use colorful language for effect. At this stage, we believe time is of the essence and we’re not going to aggrandize anything to get you to the next level of management weaselspeak – that’s not who we are. The older we get, the less we care whether someone’s offended or not.

*Source: U.S. Small Business Administration