Business Owner's Failure to Plan for a Sale
In Issue #55, we identified the Top 33 Obstacles to a Successful Business Sale. This issue will expand on the number one obstacle to the successful sale of a business – the Business Owner’s Failure to Plan for a Sale.
" Men never plan to be failures; they simply fail to plan to be successful." William Arthur Ward
Business Owner's Failure to Plan for a Sale
Simply stated, the reason most small businesses are not saleable is because owners do not plan for the sale of their businesses.
Some do not even realize planning is necessary. They think a business can be sold just like a residence or a used car is sold. That is not the case. Business sales are much more complex, much harder to finance, and there are lots of obstacles that can preclude the possibility of a successful sale.
Excuses
Other owners may have a general awareness of the need to plan their exit, but they never act on it. Owners have many excuses: “I’m too busy running the business on a day-to-day basis.” What would I do if I sold the business?” “I’ll never retire.” “I’ll deal with it when necessary.” Excuses go on and on. For more information, read this article: Issue #45 – Rise Above the Excuses for not Planning your Business Exit.
Facing mortality and fears
For many, it’s a subconscious emotional issue that they don’t want to face – their own mortality. How many people put off writing their will? Exit planning is similar in nature. It forces owners to consider their retirement or death. Many entrepreneurial personalities dread facing those types of considerations and will only do so when something unexpected, such as illness, disability, near death, etc., forces them to face reality. For more information, read this article: Issue #52 – Contingency Planning – Facing Your Own Mortality.
Businesses have an assortment of obstacles
In the previous issue we listed the Top 33 Obstacles to a Successful Business Sale. Almost all businesses will have an assortment of obstacles that need to be addressed to make the business saleable, or to maximize the value of the business. Once the obstacles are identified, it takes time to develop and implement plans to overcome or minimize the challenges.
Obstacles might preclude the sale of your business
There are many obstacles that will not allow you to sell the business:
- If you do not know the value of the business, or if you are unclear as to how much you need in retirement to maintain your lifestyle, or if you are unaware of the tax bite you will incur, how can you know if you can afford to sell the business? For more information, read this article: Issue #15 – Can You Afford to Sell Your Business?
- If you have unrealistic price expectations and are unwilling to change them, the business will never sell. For more information, read this article: Issue #60 – Owners with Unrealistic Price Expectations.
- If you have other partners, or you own a franchise or have exclusive licenses, your ability to sell is significantly influenced by third parties. For more information, read this article: Issue #89 – Lack of Required Approvals from Stakeholders.
- If you have a C-Corporation, the tax implications are significantly negative and may preclude your ability to sell. For more information, read this article: Issue #64 – C-Corporation Tax Implications.
- If the business is too dependent on you, and you have no strong second-level management or organizational depth, you may not be able to sell. For more information, read this article: Issue #67 – Inadequate Second-Level Management.
- If your Seller’s Discretionary Earnings (SDE) is less than $100,000, it may not be saleable; if it is, you may have to provide significant financing yourself. For more information, read this article: Issue #57 – Inadequate Seller’s Discretionary Earnings (SDE).
- If you have very few customers or customer concentration issues, it will have a noticeably negative effect on the sale of your business. For more information, read this article: Issue #68 – Customer Concentration Issues.
- If the timing of your decision to sell is bad, it can negatively impact the sale. For more information, read this article: Issue #87 – Bad Timing – Waiting too Long to Sell.
