Business owners today are inundated with offers to sell their businesses. The phone calls, texts and emails are relentless. “We have qualified buyers ready to acquire your business.” “Now is the perfect time to sell.”
These solicitations may be appealing. They may be well-intended. But chances are these marketers know nothing about you or your business. They are simply dialing for dollars. And, in many situations, these targeted business owners should NOT exit their businesses — yet. That time will come, I promise, but there are several reasons why a business owner should not exit their business at the present time. We’ll discuss three of them in this article.
Reason #1: You’re not personally ready
Business owners who exit prematurely often live the rest of their days with regret. This is because they hadn’t considered their future. They hadn’t thought about how they would spend their time after exiting. The process of selling was all-consuming. Now that they’ve sold, they’re left bewildered, wondering what to do next.
Other business owners aren’t personally ready to exit because they haven’t accomplished their goals yet. They still have a passion for their businesses. I see this frequently, especially among people who are in good health and enjoying themselves in their business roles.
Some business owners aren’t ready to exit because they feel called to continue their work. I put myself in this category. I believe that I’ve been called to do what I do. Exiting my business at this point is not even an option.
Business owners who are “ready” have done their homework and developed a clear plan for themselves and their families. They are prepared mentally, emotionally, spiritually, financially and relationally. They understand what they are doing and the implications.
Reason #2: Your business is not ready
To exit successfully, the business owner needs to be ready, and so does their business. I’ve spent the majority of my consulting career helping companies become more profitable, sustainable and transferable. I know from experience that it takes time to make significant changes in a business.
When a company isn’t ready to be sold, potential wealth can be left on the table. When a family business isn’t ready to be handed off to a child, the likelihood of failure increases. This is a common mistake business owners make and is why many businesses never survive the second generation.
A better approach is to proactively address the company’s most important areas that affect value and sustainability. Business value may be tracked over time to see the impact of changes. One or two key changes can have a significant impact on valuation.
Reason #3: Your successor isn’t ready
Many owners intend to leave or sell their businesses to a child, grandchild or employee. They would do well not to assume their successor is ready to take over.
One effective approach is to require that the successor work elsewhere for several years (five years is common). This requirement breaks the chain of entitlement. The outside experience is often invaluable to developing leadership skills and allowing time for additional maturing.
Another way to test readiness is to put the successor in charge before the owner departs. I recommend a minimum of a year. This hand-off will allow the successor to experience the challenges of being in charge with the current owner’s support and guidance.
Seller beware
As I was writing this article, I received an email informing me that there are many qualified buyers in my space and that my business is very valuable. I’m flattered, of course, but this person knows nothing about me. If they did, they would know I’m not ready to sell and won’t be anytime soon.
When I am ready to begin pursuing my exit, I’ll work with an adviser. A good adviser will educate, inform and help guide decisions that are in my best interest. He or she will ensure that I am personally ready, my business is ready and my successor is ready.
Now go forth.
