Updated: Sep 8, 2022
According to a recent survey from P.W.C., 70% of small to medium sized businesses in Canada are planning to sell over the next 5 years. That’s well over 800,000 businesses. As a business owner, does this concern you? Is your business ready for the next step? How do you make your business stand out to a potential acquirer?
Every business and entrepreneurial journey, just like any personal story, will have a different ending. Some business owners will choose to sell the business they’ve built, others will choose to pass it on to a family member or trusted employee. Some will just close the doors when they’ve had enough. All of these options are valid choices, but it’s important, in order for the business owner to be happy, that it is just that….a choice.
Are you ready to take the next step in your business journey? Have you prepared yourself adequately? Based on the research, over 75% of business owners who exit their business were dissatisfied with the outcome. How do you know the right time to sell your company? One answer to this age-old question is that the time to sell is when someone else is willing to invest more in your business than you are.
Why do you want to exit your business? What do you plan to do after you leave your business? Many owners decide to sell because they need to retire or take care of their health. Those are valid reasons to exit, but they do not necessarily lead to a satisfying result.
How personally attached to your business are you? Have you built a fulfilling life outside of your company? How much of your self-worth is tied up in your role as the owner? It’s natural to feel proud of the business you’ve built, but being too personally invested in your company can lead to a difficult time transitioning out of it.
Have you considered the practical financial questions surrounding your exit? How much is your business worth to you? What’s your bottom line? How much of that money are you willing to receive over time or put at risk in return for a potentially bigger reward in the future? Perhaps it’s not the right time today, but by having a realistic idea about the market value of your business will help you to create a compelling story and get the price you’re looking for when the time is right.
Much needs to be accomplished to guarantee a positive outcome for the exit from your business. It is necessary to start long before the actual transition of the business to ensure that this transition remains a choice. It certainly would be nice to make a clean, crisp break from your business after an all-out sprint, but for the vast majority of business owners the process of selling a company is a squishy, multi-year slog. So the sooner you start the better.
One question you will be asked by an acquirer is why you want to sell your business. This can be tricky to answer correctly. Don’t just tell them you want to retire. Make sure the acquirer knows that you’re proud of what you accomplished and that the business is built to last and has lots of continued growth potential. You will also want to be able to back these statements up with tangible examples and evidence. A good exit story can help you get to the number you have decided on.
These questions are just the beginning of the planning process for a business transition. Understanding and clarifying the story of your business will help you with the complex decisions you need to make for a successful exit. What happens in the next chapter of your story?
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