You’re ready to sell. Is your business?

/in /by Jim Leonhard
A recent article in the NY Times caught my attention: “Why Many Small Businesses Cannot Be Sold”, by Josh Patrick.
The article cites a statistic that only about 4 to 5% of businesses recently listed on BizBuySell (a popular website that lists businesses for sale) actually sell. That’s an alarming statistic.
According to the article there are three fundamental issues business owners need to address if they really want to sell their business:
  1. Create a recurring revenue model.  Businesses that have a recurring revenue model are easier to sell than those where new revenue sources (i.e., customers) must continuously be found. I agree completely.
  2. Become a passive owner. Get yourself out of the day-to-day operations as much as possible to increase value to potential buyers.  If you are no longer deemed essential to the success of the business, a buyer can more easily see themselves being successful after the sale. In my experience, becoming entirely passive is a lofty goal for most small businesses, but you can make yourself less critical if you focus on this years ahead of a sale.
  3. Consider who the right type of buyer might be.  Is it a competitor, an individual investor/operator, a private equity group, a public company, etc. You will need to produce all the information needed by potential buyers.  Different types of buyers need more of certain types of information. You also need to determine what information is truly “sensitive” and develop ways to protect it in the sale process, especially when the buyer is a competitor. Experienced business brokers and M&A advisers are expert at this.
For more information about preparing to sell and selling your California business successfully, please Email or call Jim Leonhard at 916-800-2716 or jhleonhard@exitstrategiesgroup.com.