MBA1511 Is Now a Bad Time To Sell a Business?

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Hey oh welcome to the hundred dollar MBA show. Straightforward business advice on the daily with our D10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of the Hundred Dollar mba, a complete business training and community online and in today's episode you will learn Is now a bad time to sell a business? You might have been planning to sell your business for some time now and you're ready to do it. But wait up, we're in a pandemic. You may have not expected this to happen, of course, and maybe you've been planning to sell your business for some time. But we want to make sure that when you sell your business you get the most value possible. And timing matters. There are buyer's markets and there's seller markets and depending on your business, the age of the business, how big it is and how much revenue you're making when you sell your business can give you an extreme amount of leverage and you want to make sure you have that leverage so you can get the most value, the most dollars for your hard earned business. That's what we get into in today's episode. When is a good time to sell your business if not now? And what factors come into play? Lots to cover. So let's get into it. Let's get down to business. It's no surprise that generally this is a down market. Right now the economy is suffering because of all the close downs and you know, the self isolation that's happening with COVID 19 and anybody who has cash has money that is buying something. The buyer right now has a lot of leverage because the options to make money, to have money are less now than they were before because of these close downs. So if you're looking to sell your business generally in a down market market, you're not going to get maximum value. You're not going to be in the best position to ask for the price you're looking for. And this goes for any big asset, whether you're selling a house, a car, or, yes, a business. There are exceptions, of course, if you're selling a business that's on the up, that is seeing extreme growth. And these are businesses that are online that are seeing growth during this pandemic, whether it's online communication tools, remote work tools, online course platforms, things like that. And even if you're in that market, it's probably not the best time to sell anyway, because you want to ride that rise so you can get the maximum value. You want to, you know, capitalize on your hard work to get to this point, to actually bet on a winning horse, let the horse win a little bit. Right? Many people believe that this is actually a really good time to buy a business. In fact, in the next few months, many businesses will be up for sale. And because many of these business owners are looking to, you know, have some liquid assets trying to make some money, they'll be a lot more reasonable on the negotiating table, allowing you, the buyer, if you're buying the business, a chance to really get a fantastic deal. Deal you probably wouldn't get in any other situation. This is an unprecedented time in our history as a race of human beings, right? As a people, as a community around the world. This has never happened to us, where business, businesses just shut down because of a virus in our lifetime. So unprecedented things will be happening, and it will favor who has cash on hand. This is why many economists will say, if you have a business and you can ride out this rough spot in the economy, this is your best course of action. Because selling it is going to give you really, really low returns. You can write it out and bounce back from this recession. Even if you sell it immediately after the recession's over, you're going to get a whole lot more for your business than if you sold it right now during a recession and at a time where you have very little leverage on the negotiating table. Now, having said that, is it absolutely the worst idea in the world? You should never sell your business during a time like this. I don't believe in black and white in business. I think there's a lot of gray areas. And of course, if you need to sell your business, you have no other choice, then you got to do that. That's just something that you have to do, and you have to bite the bullet of the loss. You're going to take because you're not getting maximum value. You may not be there yet, but you might be there ready to sell your business in a few months, maybe even in a year. This is the time where you get your house in order, get your paperwork in order, your finances in order, the legalities of your business, your trademarks, your procedures, your work contracts, your employee contracts. You make sure that if you're gonna hand it over to somebody, that it's a clean, easy transition. Everything's transparent, everything is easy to understand. And not only you, the business owner can make sense of it. One of the best things you can do if you're looking to sell your business in the next year or so is to hire an accountant, if you don't have one already and sit down with them and say, hey, I'm looking to sell my business. I want to make sure all my finances, all my contracts, all my payroll, everything is in order and it's documented. And it's easy to understand for somebody who would be interested in jumping in and buying my business. Your accountant will also probably make recommendations to also get a lawyer who can also make sure that all your trademarks are up to date. The way your business is structured, is structured properly in terms of its entities, its ip, all that kind of stuff. You may want to leave the business, sell the business, but want to keep a part of it. Maybe your personal brand, your personal blog. You gotta make sure that those business entities are separate. That way you can hold on to the things you want to keep and sell the things you don't. This is a very small investment that's going to reap a lot of benefits for the buyer and for you. Because the buyer is going to be like, hey, this, this whole business's ship is in order. It's going to inspire confidence. It's going to inspire the fact that they can jump in and take over with ease. Going to be clear for you, you're going to save money in the long run if you invest in cleaning things up with an accountant and a lawyer. Now, where do you sell a business? There's plenty of sites. I know that Empire Flippers is a great site for online businesses. If you're looking to sell your business or buy a business, they're basically a marketplace for buying, selling businesses. They make their money off being kind of the broker or the middleman. I know Flippa does the same thing. But one of the best ways to sell a business is through your network. Letting your network, the people that you know in your industry, in your market, that you're interested in selling your business or you're interested in maybe entertaining any offers. They can put the word out. They can tell people they can mention it in their next phone call, their next meeting, their next whatever it is. To somebody who's always looking to buy businesses, there's always somebody who's looking for a great investment or even a firm. And a recommendation from somebody they know is going to be a whole lot more valuable than just seeing a random listing on a website. So don't be afraid to tap into your network and let them know that you're open to offers.

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So hard on building our businesses. There are like a family member to us. We spend so much time working on them and building them and improving them years in the making. And when it comes time to maybe selling that business, it's not easy. It's an emotional situation here. You're letting go of a part of your identity, part of your history. This is why I recommend having somebody involved, like a lawyer, a broker, somebody who's not emotionally attached to the journey of building this business. Somebody who can get you a deal that's reasonable from an objective point of view. They can maybe put some sense into you as well and also allow you not to reject offers that are valid, good, solid offers you should take. It's good to have an advisor that's not emotionally involved in the situation. Many of us at some point in our life, we sold our used car. You know, we sold a car of ours and we value the car so much because of the memories. And, you know, the person who's buying the car wants the car, doesn't want the memories, right? Just give me the car. So you got to separate the emotion. It's even harder with something like a business. So make sure you have somebody with you and agree, hey, listen, I need you for this reason so I can be able to make the rational decision and see a good offer when it comes our way. Well, that's Teddy's lesson. Thank you so much for listening. If you love what you hear, hit subscribe right now. And whatever you use to listen to podcasts, whether it's Stitcher Radio, Apple Podcasts, Overcast, Spotify, Himalaya are on them all. By hitting subscribe, you also get access to over 1500 business lessons in our archives. It's the only way to get access. So hit subscribe right now. Before I go, I want to leave you with this Never sell a business until you know what you're going to do next. If this is what you do day in and day out and you're about to sell the business, make sure you have a plan on what you're going to do next. Maybe it's a change in career or pivoting. Maybe you're going to go off for six months and write a book. Whatever it is, have a plan of action. It's a good practice because you don't want to leave something and find yourself struggling to make use of your time, your day, and feel significant. As a business builder, as an entrepreneur, this is a big part of who you are, right? Feeling significant, feeling like you're contributing to the world, feel like you're doing something productive. You don't have that. That's your fuel. You're going to really slip into some really negative emotions. So make sure you have something. Set up some plan of action, what you're going to do after the business is off your hands. Now, many people, when they sell their business, are going to have to vest or they're going to have to work there for a little bit for handover, whether it's a year or two. But even then, have a plan of action because that time will pass and you're going to need to move on and do something else. Thank you so much for listening and I'll check you in tomorrow's episode Freeride Friday. I'll see you then. Take care. Of.

We've all been there. You hold on to a coupon but forget about it and suddenly it's expired.

Expired in 2012. Dang it.

Fortunately, by switching to Geico, you could save about 900 on car insurance without ever touching a coupon.

It feels good to save Big. It feels good to Geico.