Are You Exit Ready?
Business is a funny thing.
When you are ready to sell your business, it is too late to get ready to sell your business.
Serious buyers want to see a data room that proves you are making the profits you told them about. If they like what they see, they will give you a letter of intent and move into that infamous “due diligence” phase. This is just a polite way of saying, “We need to make sure that you are not lying to us.”
I said business is a funny thing, but that’s not the funny part.
This is the funny part. When you have done all the things that will make your business highly attractive to dozens of buyers, you will no longer be anxious to sell it.
If you are anxious to sell your business, it is probably because you are tired of solving the same 4 problems over-and-over again.
- People problems: you are constantly having to recruit new employees and good people are hard to find.
- Customer problems: unhappy customers create unhappy business owners.
- Operating problems: improvisation creates chaos. Properly supervised systems generate high quality work, high profits, and happy customers, but you don’t have the time to create and supervise those systems. Right?
People problems, customer problems, and operating problems are easily solved when you know the right people.
But there is one last problem that almost no one knows how to solve.
- Advertising: It is impossible to make really big profits when you have to outbid all your competitors to get the pay-per-click leads you need to survive.
The solution to this problem is elusive because it is precisely the opposite of what most people think and believe.
If you are ready to get exit ready, I’ve got a hard truth that you need to hear:
It takes more than a few months to get your company ready to sell. If you want to sell because you are tired and no longer having fun, your business is not ready to sell.
I’m not saying that you cannot sell it. I’m saying that you are going to have to accept far less money than it is worth. This is because you are negotiating from a position of weakness. Your business has hidden problems and the buyers will find them. Buyers are good at that.
Oh! They made you a good offer? You have a letter of intent?
Forget all about that. “Due diligence” is about to rain on your parade, kick your cocker spaniel, and take away your birthday.
When the price of your company has been whittled down to a number that you can barely accept, the odds are higher than 90% that you are going to get one last haircut at the closing table.
I’ve seen this movie countless times. I know how it ends.
It is Friday. You are sitting at a conference table. The pen is in your hand. Your family, your friends, your banker, a car dealer, a boat dealer, and a real estate agent are all waiting for your phone call, ready to help you celebrate.
That’s when the people on the other side of the table let you know that they just now discovered “one more thing” as they were wrapping up their “due diligence” phase. This “one more thing” makes your business worth 15% to 20% less than the amount you were expecting to have in your pocket when you walked out of that conference room.
You accept that haircut and never talk about it. Not even to your closest friends.
That’s what happens when you negotiate from a position of weakness.
Are you willing to spend a few years so that you can negotiate from the high ground?
It isn’t hard to do. [Hyperlink to exitready.com]