Buying a business is tough! Selling your business is tougher!

As you may know from my newsletter, I’m a trend person. I love reading about demographic trends and the impact on our culture. So reading about the coming tsunami, as the first of the baby boomers turn 68 and the last boomers reach the milestone half century, it’s like being in a candy store for me! What does this have to do with buying or selling your business? Well, I’ve been doing a lot of research on how those trends matter in the business world, and what I’ve found is that six (6) to eight (8) million businesses will change hands in the next 9 years as boomer owners exit their business. How they exit their business is where it gets really interesting. According to John Leonetti,  author of: Exiting Your Business, Protecting Your Wealth :A Strategic Guide for Owners and their Advisor, seventy-five percent (75%) of business owners want to sell their business, but only 20% actually sell. The implications of this are grave for many boomer owners because the majority of their net worth is tied up in their business, and thus, the majority of their retirement funding, too.

Barriers to a sale

What to do? Well, you can begin with a business valuation, to get a sense of what your business is actually worth…not what you hope it’s worth.  In a recent Wall Street Journal article ‘Stick Around After the Deal’, by Lisa Ward, one of the biggest barriers to selling your business is finding a buyer with the ability to get financing.  Most buyers don’t have a wad of cash sitting around waiting on the purchase of your business.

So now what? Seller financing! Yep! That’s you. You are the bank, providing the loan and the buyer pays you back over time. Sure, there are risks with that, but according to a BizBuySell.com  survey, ‘over 90% of business brokers consider seller financing to be either critical or important for getting a deal done’. Ward goes on to say, ‘In this economic climate, sellers willing to finance the sale can often get a faster sale and a better price than they would have gotten if they waited for a well-funded buyer’.

The advantages of seller financing? Rather than liquidating it, or disposing of it in a fire sale, you get to sell your business, for money! In addition, you may want the opportunity to stay engaged in the business, in some capacity. This option can provide that to you as a standard part of the contract.  And, if the buyer defaults on your loan, you can activate your loan agreement default clause, returning the business to you without going through a lengthy and expensive court battle. The only problem with that is…you get the business back! If you wanted the business back, you probably wouldn’t have tried to sell it in the first place!

Don’t Get Derailed

What that means is …  if you are going to seller finance, you are really making an investment in your buyer. You are counting on his or her ability to run the business profitably and sustainably so there is cash to pay you back! So what will it take to ensure that? You need to seek and select a qualified successor that has the competencies and skills to run, grow and deliver profit and cash flow. Will they be ‘perfect’? Doubtful. But they may have the ability to grow into ‘pretty good’ or even ‘great’! Without securing someone you have confidence in that can deliver, you have no return on that investment.

Ask us about our assessment tools to help you qualify your successor(s).

Get Started

Starting early is key. Building an intentional process to qualify and develop your candidates will go a long way towards ensuring your identified successor is a viable successor. It can take 3 – 5 years or more to instill the level of experience, skills and confidence required to run your business profitably. It’s time to get started.

Terrified

That’s not the word that comes to mind for most people when describing a future without the responsibilities of running a business. It’s not the word that comes up when imagining a life with the time to do whatever you want to do, and sufficient financial reserves to fund a range of options. So why is that the word I hear most often? Often, business owners confide in me about their plans for succession and how they are thinking about a full, or some sort of partial exit. Whether they are 55 or 75 years old, the most common emotion they express to me is fear. Despite a successful, financially rewarding career as an owner, this is a major life change, and they have fear. In some cases it’s a subtle gnawing fear – more of an uncertainty about getting started or a discomfort thinking about ‘what’s next’, making it easy to go on with business as usual. In other cases it’s a constant stressor as worries about finding that right buyer/successor, , concerns about fully funding their lifestyle in retirement, waning energy levels, or what to do with endless hours of free time permeate sleepless nights or creep in during the busyness of the day.

Our perceptions, their reality

I know what you’re thinking…You’re thinking ‘That’s crazy! Those worries are unfounded. They are successful business owners! Hard charging, financially savvy, with a backlog of activities they never had the time to do! This will simply be the next stage of a wonderful, earned, and well-deserved life!’

Sadly, that’s rarely what I hear. The fear they face is often due to one of the following:

• Stress from the reality of letting go of their business. This includes the stresses of finding a trusted, qualified buyer, negotiating through the sale or transfer of their business, and the uncertainty of whether their financial return will meet expectations…or worse, their base financial requirements.
• Losing their identity, and in some cases – their perceived status, built over a lifetime of growing and leading a successful business. Who am I if I am not the owner of…?
• Uncertainty about ‘what’s next?’. In our achievement-oriented culture, retirement/semi-retirement is treated as an exciting, coveted time! But many owners fear endless days of nothing -- boredom. And worse, they believe that if they broach the subject of their uncertainty with friends or family, they will be ridiculed or summarily dismissed. And they just might be!

The reality is that every owner will leave his or her business one day. Whether they leave to go TO something they have been waiting to do all of their life, find themselves ousted from the business as a new owner takes over, or they experience health or family issues…. They will exit.

The opportunity

To do it well, we need to address the fear. How? First, we need to talk about it! We need to reduce the stigma associated with the stress and uncertainty that comes with a life change of this magnitude. A change this big will often come with a wide range of emotions. Holding them inside serves no one. We need to be able to talk about them, express them, seek out others who are facing them as well. Let’s destigmatize the fear!

We also need to take action. We need to come together to create an environment where it’s acceptable, even encouraged, to acknowledge the stressors, and then we need to build systems and structures to navigate the transition from business ownership to what’s next. We need to support each other as we figure out how to let go of the responsibilities and identities that served us so well in the past and craft new ones, creating a different and exciting future.

Cultural Shifts

Some of the most significant shifts in our cultural and social norms have come from the combination of changing demographics, a collective recognition that change is necessary, and the innovation and creation of a whole new set of systems and structures to facilitate that change. It’s time to create a shift. With baby boomers turning 68 this year, six to 8 Million businesses will be changing hands in the next nine years. We need to address the stress and uncertainty head on. This is not just a nice to do. It’s imperative.

What are you willing to acknowledge…even if only to yourself?

The Disorientation Of Selling Your Business

There is a world of difference between being a successful employee of a large corporation and the successful owner of a business that was started from scratch. If you are one of the latter, you know just how much work you had to put into it, with all those sleepless nights, the long days of work trying to get those first clients interested in your products or services and the uncertainty of the first years of business. These are things that all entrepreneurs remember as they gain more success. Inevitably, there comes a time when they need to find someone who will take over the business. In many cases, their children aren’t interested in the company or aren’t capable of running the business, so their only option is to sell their business. Some of them decide to maintain an ownership or leadership role — remaining as Chair of the board, or Chief Operations Officer, but at some point, they recognize that the key to financing the rest of their lives lies in selling the business and collecting enough profit to live the rest of their lives without worry.

This whole decision making process can be a very disorienting experience for owners because their business basically became part of their essence, their identity. At some point it ceased just being a way to make a living. Everything that they have achieved, the things they own and the experiences they’ve had are all linked to this company they built from the ground up. When they decide to sell it, it is like going through a grieving process that is similar to the loss of a loved one. The only difference is that they are relieved of all the hard work and the feeling of always having some responsibility.