Over my 19 year M&A advisory career, I have met many business owners who spent more time planning their children’s wedding, their 50th wedding anniversary, or even their fantasy football draft, than they spent planning for the sale of their business.
According to the quarterly Market Pulse Report, we know that when it comes time to sell their business, less than half of all business owners plan ahead. That means that most owners wait for some type of trigger event before they go to market. Those triggers are unplanned and unpleasant in nature, stemming from a family health issue, conflict, or burnout.
According to Christopher Snider, CEO of the Exit Planning Institute, 50% of business owners exit because of one of the “Dismals Ds”: death, divorce, disability, distress, disagreement.
Unfortunately, that often means business performance is on the decline. Or, at the very least, it means the business owner hasn’t made specific changes that will better position their company for a sale or transition.
Selling a well-prepared business is a completely different experience than selling due to a Dismal D trigger event. You have more leverage, and the process is less stressful as you are proactively executing a strategy versus reacting to an event in your life. With planning, you’ll be able to walk away from the closing table feeling satisfied and confident that you made the right choices.
It’s true that you may still be able to sell your business without planning. But the more you plan, the more options you have when you want to exit. When a business owner is well-prepared with an attractive business, they typically receive more offers. That gives you more leverage in the sale negotiations.
The holy grail is when you have prepared the business, you are emotionally ready, and the M&A market is robust. If you can pull that off, it’s typically a win in terms of valuation and deal structure. Plus, the sale process will go faster and smoother, reducing the inevitable emotional turmoil for you.
Not everyone achieves such perfect timing, but your chances are significantly better if the sale is part of a planned exit strategy. Whether you’re 10 months or 10 years away from exiting your business, take time now to truly think about how and when you will leave.
Have a conversation with an M&A advisor. It doesn’t mean you have to sell right away. But you become better educated about your exit options, the importance of timing, and how the process works.
Al Statz is the CEO of Exit Strategies Group. For more information on exit planning or to discuss a potential M&A or business valuation need, contact Al at firstname.lastname@example.org