Putting Up Your Business For Sale? How to Assess Your Financial Readiness

Have you ever thought about selling your company? Well, you need to know whether or not you're ready. There are two factors in selling a company. One is the financial situation and the other is your level of emotional attachment. In other words, is the company making money, is it doing well? And the other thing is how much do you love the company that you want to sell? Your financial situation, the easier of the two factors to consider is, is oftentimes the one most overlooked by sellers. Now, the key question is the proceeds you receive from selling your business will give you the financial means to leave the business. Is that correct? Well, the value of your business is a large chunk of your personal net worth. To best assess your financial readiness to sell a company, you should hire help. You should get a reputable wealth manager, an individual who can analyze your entire portfolio and calculate your post sale needs. You should analyze your investment portfolio and understand whether or not a sale will yield enough money to fund your projected retirement or whatever else you want to do and allow you to sustain the lifestyle you want. Post sale. I work with a lot of people who are thinking of selling their company. I say, what would you do afterwards? And they don't know. I said, what could you do afterwards that earns as much as your existing business? And they have no idea. I said, well, maybe it's not a good idea to sell your company. Maybe you should just keep operating it or operate it differently or have somebody else operate it. But there's no better way to use the money that you could get for your company than the way it's being used right now. Now, if there's not enough money to allow you to leave the business and retire, there are some options that you can use in staying with a company. First of all, spend a few years building up the value before you sell. Many people actually sell a company just before it takes off. That happens all the time. I was speaking to a business executive recently and he was working for a large company and they had a small division that had a small product that he thought had great potential. So we went to them and he said, can we do a joint venture? Can you keep part of the equity and sell me part of the equity and we stay under your umbrella? And they said, no, is if we're going to sell this, we want out 100%. And they said, well, how much would you sell it for? So they gave him a fairly low price. So he went out and he borrowed the money and he bought this division from a large company and walked away. And today this large company is Almost as large as his company is. Almost as large as the large company that he bought this little, what they called low hanging fruit from many years ago. Now, another thing you could do to survive on your money is consider lowering your targeted financial spending. After the sale. You may say, well, I'm going to start spending X number of dollars per year. Well, maybe if you lower that, the sale will make more sense. Or you could choose to come up with a way to supplement your income between what you'll get from your business and what you can draw down from your funds. And the other. I had a good friend who I worked with this weekend. What he did is he retired from a large company. He sold his shares, took it into his retirement fund. Very smart thing. And then what he did is he started a new business on the side. So the new business would give him enough additional income to be able to carry him with the income he's getting from his retirement funds. Now you also have to assess your emotional readiness to sell a company. It's harder than sellers think to walk away from the business they've built for so many years. Remember, a business often becomes like a child. You've invested your emotion in it. You know everybody inside the business and outside. You spent years of your life in it. And some people are not emotionally ready to give it up. So evaluate if you are ready. How are you going to spend your days after the sale? What will you do? Some people say, when I sell this business, I'll take a vacation. Really? How long will that take? Two weeks. Then what? You need a clear indication emotionally of whether or not you're ready to sell. For instance, will you be able to plan trips and activities with friends? Will you be able to spend time with your kids and your grandchildren? You need to have a whole new emotional focus away from your business when you sell. Interesting study they did some years ago. They found that when a person sells a business that they built up all their lives, if they don't have another outlet for their emotions, their involvement, their interests, like family and children and grandchildren, they die in two years and seven months. Two years and seven months. Their body starts to pack up, their heart starts to go, they start to lose their excitement about living. So when you decide to change from owning a business, you need to have something else you're going to get involved in right away. Will you pursue a hobby? Will you get into building or painting or. Many business people get into consulting with small businesses. They join the score, the Society for Retired Executives and they act as advisors to small business so they can keep involved in what they were doing all their lives. Another thing you could do is you could run another business in a completely different field. I just spoke to two groups this week and both of them sold out their businesses to other people and walked away and both of them signed a non compete and both of them just waited and spun their wheels and planned until their non compete was over and now they're going to start new business doing what they were doing in the past but they sold out from because they just can't keep out of the game now. If you can't foresee or describe your post sale life, you should question whether or not you should sell your business in the first place. Always ask yourself the tough questions before selling your business. Will you have the necessary funds for your desired post sale lifestyle? Are you emotionally ready to pursue a life after business ownership? If you can't develop a post sale picture of your life, you may need to keep running the business assuming that you have the will and drive to remain competitive and relevant. So one of the exercises you can do is you think, I'm thinking of selling my business, what will I do afterwards? And make out a list of 20 different things that you could do if you sold the business and had the money in the bank. And then as you go over that list you might become clearer and clearer about the fact that you do want to sell the business and you do want to be able to do all these things. Let me tell you a quick story just at the end of this message. I was giving a seminar in Sydney, Australia for business owners and a young guy came up to me and told me his story. He said he'd gotten out of school at the age of 18 and he started a business and he'd been working night and day, six, seven days a week for 10 years and he built his business up so it was successful and he wanted to sell it and he'd been trying to sell it for six months or a year and he didn't know what to do. I said, have you ever read any books on selling your business? He said, are there books on selling businesses? I said, of course, thousands of businesses are sold every year and there's excellent books in the bookstore on how to sell your business. He couldn't believe it. So at lunchtime he went across the street to a very large city bookstore and he found there was a whole section in the entrepreneur section. So he bought three books on how to sell a business. He came back and he showed me the books and he said, I'll keep in touch with you. Within two months, he had sold his business for an excellent price and protected himself from anything happening to the business. He had money in the bank. He took three years off, he told me many years later. He took three years off and traveled to Europe and traveled around and had a great life and then came back and started a new business. So if you need or want to sell your business, remember, it's been done thousands of times. Some of the best thinkers in the world have written on this subject. So go to your local bookstore or go onto Amazon and download a book on how to sell a business and it can open your eyes to all the things you need to think about.