Hope is Not a Plan
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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowThis is sobering. A local business broker in Indianapolis reports nine out of 10 business owners who want to sell are turned away. Of the one in 10 that does make it past the first analysis to sell, over half of those company owners don’t get the sale price they hope for or believe the business is worth. Bottom line, hope is not a plan if you want to sell your business.
Whether your business is a startup, or it has matured (along with you) and it’s time to sell, look at your company and ask, “Is it ready to be sold? Would I buy this?”
Why? Because if you don’t start with the end in mind, it’s likely you won’t like the results. Someone seriously looking to buy a company will want to know and understand the framework, processes and blueprint behind the company. They’ll want to come in and know it’s operational from day one. Think of it this way: What’s the difference between a rickshaw and a car?
A rickshaw ride may be nice. It has some really great features such as a comfy seat, a great view, a unique experience and a nice person pulling it. Once that person puts it down, it can’t go forward anymore. It’s stationary. There’s no progress. A business buyer doesn’t want a stationary rickshaw without the person who runs it. That’s a tough sell.
A car is a mode of transportation, just like a rickshaw. It might have run for several years and have a few places worn in here and there, but if I pay for it and get the keys, I can start it up and drive it. There are processes and systems to make it run, well. That’s an easier sell for a business broker.
A business owner hoping to sell their business or retire needs to understand hope isn’t a plan. Stop pulling the rickshaw and start thinking about how to make a car that’s attractive. Owners must have a business that turns any chaos into order, confusion into clarity and disorder into process. Why? So the buyer can take the keys, start the car and go.
Think differently. What used to work no longer does. The wave of retiring GenX owners is increasing daily. And more and more business owners want to sell. But are the businesses attractive? Buyers have the will, desire and capital to buy a business that operates without the owner. An effective business system should have processes, procedures and policies. If those aren’t in place, it’s time to think differently and find someone to help put them in place. Processes include sales, marketing, inventory management, accounting, facilities management and more.
Be as smart as a fifth grader. Once procedures are documented imagine describing what the business does and how it works every day to a fifth grader. Are the processes clear and easily explained? Or is it a struggle and if so why? Documenting processes takes more than just the owner being involved. It’s a team effort. As a bonus, the more systematic processes are put into place, the smoother a business runs. And the more attractive it becomes to a buyer.
Produce consistent results. Consistency is not easy. Just pull out a blank sheet of paper and literally draw business process from end to end. It sounds simple. It’s hard! Think about that car analogy. What makes the car go? What tools are needed for upkeep? What are the “gears” a business uses throughout the year? What is the “fuel?” Consistency is key to being attractive to a buyer. No one wants chaos when they want to turn a profit.
Hope is not the plan. No plan in place? Don’t feel bad or be embarrassed. Most owners do not have a plan to sell their business. That is until they need to have one. Preparing a business to sell takes one to three years. Having a coach to work through building the processes can maximize the business valuation when it is time to sell a company because the business has become a sleek, cool, shiny car that a buyer cannot resist. And when the seller hands over the keys, it’s financial freedom and personal fulfillment.
Bob Paden is owner of The Growth Coach Indianapolis North.