Developing a Seller’s Mindset

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We’ve all seen it time and time again. You’ve spent many years building your business, only to find out that it’s essentially worthless. Or you’ve discovered it’s worth much less than you thought it was. It’s a frightening experience, at the least, bewildering. How could that possibly be?

What is it that makes a business sellable?

Why do some businesses attract a feeding frenzy of buyers, with competition fiercely driving the price upward?

In essence, why are some businesses sellable and others are not?

To answer this question, let’s take a step back in time. For many business owners, especially ones just starting their entrepreneurial journey, they began with an idea born from experience. They’re engineers, professional consultants, lawyers, software developers, manufacturers…the professions are endless. The entrepreneur takes his experience from the working world and brings it to a new venture.

Many struggle to gain ground, but over time, through perseverance and hard work, your business starts to flourish. You bring on more employees, you hire consultants, you develop marketing and sales programs, and more. At first glance, things look great. The outside world looking in would think this is a very successful business, and it can be.

But is it sellable for maximum value? Are you ready to sell?

That’s truly the question of the day. We have hundreds of digital marketing campaigns designed to get to the root of those questions.

It’s a balance between educating business owners like you when there is tremendous noise out there, misinformation and sadly, professionals who are more interested in making a buck than providing the advice you need to successfully exit for maximum value.

An exit, simply put, means transitioning your company to a third-party or a variety of other ways, like selling to your kids, your employees, your management team and more.

So, what should you do? How can you be better prepared, well in advance of your exit, so you’re not caught flat/footed if and when that time comes?

You must get educated on your exit journey. You need to understand what it means to prepare your business for sale. Let’s go over the key areas of focus that will help you maximize your pay off when you ultimately transition your company.

1. Know what the market thinks your business is worth.

This is really important. There’s a saying that goes like this:  “Your business is worth what someone will write a check for it.“  That sounds cliché, but you really need to understand how business valuations work, and what drives enterprise value and buyer offers. 
Do you know how businesses in your industry are sold, and for how much?  That’s an interesting question, right? Please read our blog on business valuations HERE to learn more.

2. Understand the psychology behind getting you ready to personally exit.

I’ll tell you a story. Almost 25 years ago, I found out my wife was pregnant with our first child. It’s an amazing feeling, right? I’m sure this brings back happy memories for you as well (or maybe a little anxiety). The reality is that while I knew that my wife was pregnant, it hadn’t registered yet. It wasn’t until seven months later when I was offered a job that required 100% travel. My mentor said, “Steve, you are going to be a father in a month. If you take this job, you will never see your family.“ It was at that point that it dawned on me, “I’m going to be a father!“ The emotions swirled inside me.

What’s the point of this story?

Going through the selling process is a unique and taxing experience. First time sellers report after the fact they had no idea the amount of time and energy it took to go through the selling process and keep their businesses thriving and not surviving. They were so busy that it hadn’t really dawned on them that they were actually selling their baby, the business they’d built  and nurtured and grown over the years. Let alone thinking about life after the sale and what that was going to look like.

It’s truly exciting and scary at the same time. PWC conducted a study that showed that 75% of business owners a year after their exit regretted the results. They felt like with what they now knew about the sales process, they would have done things differently. Many felt they left money on the table.

That’s why it’s vitally important for you to be prepared and ready to sell your business, and definitely critical that you’ve thought long and hard about life after the sale. Check out our blog post that discusses exactly this HERE to learn more.

3. Understand what attracts buyers.

You definitely don’t like being told that your baby’s ugly, right? It’s the same thing with your business. Many people believe they’ve built a great company, and definitely a valuable one. The challenge is looking at your business a different way.

We always start any conversation by having business owners like you think about your company through the buyer’s lens.

This is really important.

When you think about your company objectively based on how buyers look at your business, you can really understand what you do well and more importantly, where are the opportunities to improve your enterprise value.

I can’t tell you how many times through these conversations we reach an incredible breakthrough. Some of the things we discuss, like customer and supplier concentration, seem obvious and logical. However, the impact to enterprise value and sellability cannot be overstated.

I highly recommend that you understand the buyers viewpoints and why buyers walk away from making an offer to purchase a business. We can spend a whole blog on risk and risk mitigation strategies, but that’s for another time.  Looking at your business through your buyer’s lens can be worth millions of dollars in an eventual sale just by understanding this alone. Again, check out our blog that specifically discusses this at HERE. I promise this will be worth its weight in gold.

4. Understand the top deal killers that stop the potential offer or downstream sale in its tracks.

Deal killers. They sound scary, but it simply points to timeless events and circumstances that kill deals before they even happen. If you know these in advance, you can easily head these off at the pass or at the very least, work on these well before you decide to transition your business.

Sometimes, there are some things out of your control. The buyer may have advisers who have their own egos and agendas, or worse, they may be incompetent, preventing a deal from ever getting a deal to a successful close.

You may have advisor issues as well and weren’t aware of it, so this is very important. Do your advisers who you trust have deal experience? You cannot underestimate how important the answer to this question is.

Time is another critical element. It goes without saying that time kills all deals. The longer the deal process takes, the more likely things can go wrong. If the deal stalls, that’s potentially the best case scenario versus having a deal die on the vine when you’ve invested so many hours of your valuable time and energy.

Without stating the obvious, why is this important?

You never know when life is going to come at you fast. Your spouse may serve you with divorce papers, your parents may suddenly get very ill, your children may need you, or your health may fail you. These may sound like doomsday scenarios, but they happen all the time. Now, you may actually have to sell, and as the deal drags on and the clock keeps ticking, the value of your business may not be where it needs to be because of timing. In some cases. your dream exit suddenly and sadly disappears. Or, your motivation to sell is so great that you’re forced to sell at any price to ensure the deal goes through.

If your business is built to sell for maximum value, you’re largely insulated from this.

I know I’m pointing to other blogs, because we’ve written extensively on all of these topics, so I feel having you go back and forth to learn is really important. So, check out this blog HERE to continue the process.

FINAL THOUGHTS

I’m hopeful you’ve gotten some value out of this educational exercise and of course the other reading I’ve requested you do. Our company was born out of an innate desire to help lower middle-market business owners. We believe it’s vastly underserved, and it hits home with us. it continues to do so.

We are always saddened when business owners come to us after receiving bad advice and at that stage, their business has lost value or worse, is not sellable. To us, that’s entirely unacceptable.

If you’re reading this, you’re well on your way to understanding what can only be described as the most important education of your entrepreneurial life. I cannot over-emphasize that. Truly.

You’re part of a brotherhood of time-honored owners who’ve taken the risk to build something great. To build a lasting legacy for you and your families. To preserve the entrepreneurial spirit so the next generation of business owner can build on what you’ve created.

So, I’ll leave you with this question. Simply put, “What have you done to make your business build to sell and are you ready?”

TALK WITH AN EXPERT