Entrepreneurs are accustomed to being self-starters. They are founders, innovators and CEOs, and many took care of every aspect of their business operations at the early stages. Activities such as marketing, finance, and bookkeeping are not new to most entrepreneurs.
This versatility makes them unafraid to take on new challenges or do what must be done to grow their businesses. So it’s only natural for most business owners to want to try and sell their business on their own without bringing in outside experts to help facilitate the sale.
While some owners will successfully sell their business at a premium, some will have to settle for meager profits or unfavorable contract terms. Many won’t be successful at all and ditch the idea of selling altogether.
Savvy entrepreneurs understand that some things are better left to experts who are well versed and leverage prior experience. All these and more are the reasons why you should enlist the services of an exit planning advisor who has experience working with small business owners when planning your exit. Here is what an exit planning advisor can do for you:
1. Creating An Exit Strategy
An exit planning advisor will perform a financial analysis of your business to understand your business’s financial health and help design an exit plan suitable for your objectives. If your business is complex and multi-faceted, you’ll want an expert to help structure the deal.
If you decide to take the DIY route due to the perceived cost of hiring an advisor, you’ll experience at least one of the following:
- You’ll venture into unfamiliar territory in which you don’t have the required skills or tools that an advisor brings to the table.
- You’ll put in valuable time and resources that will be needed to support your business operations. This can result in lower productivity, which can hurt your revenue and valuation.
2. Conducting a Business Valuation
Business valuation is one of the most important aspects of a sale process. Getting it right is critical in establishing an accurate sale price. It helps the seller determine whether or not they should put their business on the market or continue growing its value.
While industry metrics such as ‘earnings before interest, tax, depreciation and amortization’ (EBITDA) can be used to determine the value of a company, every business differs in their specific needs or situations and would require a different approach.
3. Keeping You Focused
Selling a private business can take anywhere between five months and a year to complete. A profitable sale will depend on your company’s continuing strong financial performance throughout the sales process. Lower than expected revenue can force prospective buyers to reconsider their offers, which can cause the deal to fall through or hurt the sales price.
Trying to sell your company by yourself while simultaneously running the business can create conflicting demands on your time, which can have a negative impact on both the business and the sale. To sell for maximum value, it is critical that your company continue to perform at or above its current earning level. It takes time to negotiate a good deal, and it’s better to let outside expert handle the sale for you instead of doing the work yourself and falling behind in your primary duties.
An exit advisor will help you to keep your “eye on the ball” so your revenues do not decline and cash flow is positive.
4. Finding The Right Buyer
When it comes to finding the right buyers for their business, most business owners’ first instinct is to look at their network or talk to buyers they know personally. They tend to think of their competitors and other companies in their industry as the most likely buyers. A high-value transaction requires that you think outside the box to find buyers with the following characteristics:
- The buyers have the capabilities and the resources to realize higher value from the business than you.
- The buyers have the cash or the financing required to close the deal.
- The buyers are the right cultural fit with your team, minimizing operational disruptions during the transition
Buyers are experienced dealmakers, and just because a company is convenient and easy to work with, doesn’t necessarily mean it’s the right buyer for your company.
Save Time and Work with an Exit Planning Advisor
Entrepreneurs are resilient and unafraid to try new things. There is no doubt that some can successfully sell their business on their own at the price they want. The question is whether most business owners have sufficient time to see the deal through. And what impact will their inexperience have on the sale terms and valuations.
Working with an exit planning advisor who also has experience being a professional broker, like Raincatcher, will help with increasing value in your company and success in closing. Hiring an experienced advisor will not only improve your chances of getting a better deal; it will also significantly reduce the time it takes to close the deal.