I ran across this quote from the Buddha, and it applies to selling your business. The Buddha said, “Chaos is inherent in all compounded things. Strive on with diligence.”
The Buddha means we need to accept chaos and persevere through effort. And that’s what it takes to sell your business. Accept that chaos will happen and persist in your actions to achieve your goals.
How do you accept chaos and persevere? Like running your business, you need clear goals, a flexible plan to get you to your goals and help from your support team. Let’s look at each of these.
Clear Goals
As you think about selling your business, answer these five questions:
Question 1: Who Are You Selling to?
Who do you want to buy the business? Is it a sale to a family member, team member or an outside third party? Who would best serve your customers and clients?
Question 2: What Are You Selling?
In other words, is it a total sale and you’re done when the sale ends, or does the sale mean you have a reduced role that will go on for several years? What role do you want to play?
Question 3: When Do You Want the Sale to Occur?
Is it this year, in three years, or five years from now? I recently spoke with a business owner that was clear he wanted to be done with his business in three years. This degree of clarity makes it much easier to execute the steps necessary to help him reach his goals.
Question 4: How Much Do You Hope to Obtain from the Sale and How Do You Want the Sale Structured?
Obtain a realistic rough estimate for the value of your business. Later, you can obtain a formal valuation, but a rough estimate of the value is a good place to start.
Most business owners want some cash upfront when the business sale occurs, but buyers want to deposit as little as possible. A buyer wants to reduce her/his risk by making a small downpayment, so you’ll need to be flexible in the terms and conditions of your sale.
Question 5: What’s Next for You?
After the sale ends, what are your personal goals? Will you start another business, travel, pursue hobbies, or something else? This is one area when I sold my business in which I was weak. If I did my business sale over again, I would have put more effort into answering this question.
Transition Plan
After setting your goals, your business exit transition plan has four parts:
Evaluate
Look realistically at your business from the perspective of a potential buyer. What would a buyer see as its strengths, weaknesses, and opportunities? What threats are there to its continued success? It’s difficult to be objective about your business. Here is where a good business exit coach or an accountant who has sold businesses before can help you.
Improve
Take what you learned from the previous step and look to improve your business. Fix things that are important to a buyer. For example, if your revenue is flat, what can you do to increase it and create a picture of a growing business? If your books and records are not up to date, commit to getting organized. If your systems are not running the most recent versions, update them and document the changes.
This step may take some time because some issues will take longer to improve. As you improve your business, focus on the items that matter to a potential buyer. It’s like selling a house: don’t worry about the carpeting in the guest bathroom; focus on the kitchen and master bathroom.
Market
If you’re selling your business yourself, start by looking around at your industry and see what businesses might benefit by adding your business to their operations. Maybe it’s a competitor looking to expand (and eliminate competition).
Or perhaps it’s a business that is complimentary to yours. For example, if you do graphic design, do you know a printer who might like to add your type of service? Or if you own a wedding and event planning business, are there wedding venues that would consider adding your service to their business?
The key to marketing your business is to look at direct competitions and then consider what your customer does just before purchasing your services or products and what they do just after they purchase from you.
To start your marketing efforts, first create a list of potential buyers. Then approach them at industry events or directly and ask them if they’ve considered growing their business. A healthy business is always looking to add customers and clients.
Sell
The fourth step in exiting your business is the formal sale. This step starts with a due diligence review of your business by the buyer and a similar due diligence review of the potential buyer’s business. I can’t stress enough the two-way nature of due diligence.
A professional service woman I know sold her business to a buyer who looked good on paper, but when her clients interacted with the new owner, they were turned off. Another business owner I know sold her software business to a buyer who didn’t continue to serve clients effectively. The business shrank dramatically. She ended up taking back the business because the new buyer couldn’t make the payments he promised.
After due diligence, there are the formal steps in selling a business. For example, drafting agreements, and setting up the sale in the most tax-efficient manner. Here is where you’ll need a good team to support you.
Your Support Team
One of my favorite Oprah Winfrey quotes is “Surround yourself only with people who lift you higher.” This is true in many parts of life, but when selling your business, it’s critical.
When I sold my business, I was fortunate to have the aid and support of my business coach, an experienced business attorney and an accountant who had helped other clients sell their businesses. You’ll need a similar support team.
Summary
When you’re deep in the process of selling your business, you’ll have chaos at the same time as you’re running your business. It’s a lot to manage. When the chaos occurs, The Buddha’s wisdom is key. You can accept the chaos and persevere if your goals are clear, you have a solid transition plan and you surround yourself with a good team. You can do this!
Let’s Have a Conversation:
If you’re thinking about exiting your business, what holds you back from taking the next steps? I’d like to hear from you. Please make a comment below and let me know what’s stopping you. Thank you.
