One of the biggest mistakes business owners make is they don’t have a good idea of their long-term plan. This is not to say that most business owners don’t have a good plan for their business itself. Rather, most business owners don’t have a well-thought-out, long-term plan for their personal life as it relates to the business.
What, exactly, does this mean, you ask? It means a lot of business owners may have a list of reasons for why they started their business, but they don’t have a good idea about why or how they want to exit … or what they want to do after.
This can have a profound impact on not only how well you are positioned when you finally exit the business (through a sale, retirement or other means) but also how the business performs over the long haul.
Here are four reasons why it’s important that you craft your business story before you sell your business:
1. It Allows Your Business to Perform the Best
Creating a solid exit strategy and end goals right from the get-go is a great way to allow you to run the business based around your desired end-game. If your goal is to make as much money as you can in the first 10 years and then sell your business, for example, you might focus more on generating as many sales as possible rather than branding your business for the long haul.
On the flip side, if your goal is to create a business that lasts well beyond your time and is passed onto future generations, then you will most likely run the business in a different way than the scenario above.
No matter what your end goal is, knowing what it is from an early stage will allow you to run your company the way it needs to be run to achieve that goal. And if your goal is to sell your business, doing this will give you the best opportunity to sell for the highest price tag.
2. It Allows You to Identify the Right Time to Sell
Similarly, crafting your business story will also help you identify the right time to sell. For example, if your goal when starting a business is to provide you long-term financial security, then you’ll be able to choose the best time to sell by analyzing the current state of the business at different points in time.
Most people think the best time to sell a business is when you are ready to retire, but that may not be when your business has its peak value. In addition, you also may have an opportunity to retire earlier if you craft your story properly.
If you get enough money from the sale of your business today, at age 45, you may be able to retire earlier than you expected and still be financially secure. If you wait to sell because you don’t think you’re old enough to retire yet, you may find you aren’t able to be financially secure when you sell at, say, age 65 – even though you’re closer to the traditional retirement age.
3. It Allows You to Identify Other Opportunities
By knowing why you’re starting a business, you’ll be able to identify and capitalize on other opportunities as they come along. If your goal is to build enough value in your first business to cash out and invest in a new venture, then it’ll be important to constantly evaluate the current value of your business.
The best time to sell, in this case, might be when an opportunity arises and not necessarily when you can get the maximum value from the sale of your business. If you wait until your business reaches its peak value instead, you may actually earn less in the long run, since it could result in a missed opportunity elsewhere.
Receiving $100,000 less from the sale of your business today versus five years from now will be easy to swallow if that $100,000 “investment” resulted in you earning $500,000 with a new venture.
4. You Will Look Better to Potential Buyers
One thing you may not think of is the better story you have, the better you will look to potential buyers. As a business owner, you know a lot of deals are done based off relationships. And these relationships are often built from connections you make with others.
Buyers of your business will be better able to relate with you if you have a good story for not only why you started your business, but why you are selling it, too.
They’d be able to relate to your desire to ride off into the sunset and spend the rest of your days relaxing by the ocean with your family. They’d be able to relate to your desire to pursue other challenges in a new field. They’d be able to relate to your need to cash out to fund your children’s college tuition or to pay for needed health care.
What makes potential buyers leery is when a business owner doesn’t have a good story to tell. It makes them wonder what kind of business they may be acquiring, if the owner of that business doesn’t even have a good story to tell.
A good story is central to almost everything in life, but especially so in business. By crafting a good story for you and your business, you’ll be better prepared to not only sell your business, but to know when and how to do it.
Sunbelt Business Brokers of West Palm Beach can help you prepare to sell your business in South Florida, guiding you from listing to closing. If you’re considering selling your business, get in touch with us today for a confidential, no obligation conversation.