An event is defined as something that happens or is regarded as happening. It is the outcome or result of something. Its occurrence is localized at a single point in time.
The sale of your business does not just happen and it does not just occur. It is the result of a process. The sales process alone takes 6 months to a year and the planning process could take years before that!!
One of the biggest misconceptions about selling a small business is that it is an asset that can be easily converted to cash. Not only is converting a business to cash difficult, it may not even be possible. Consider the following scenarios:
- The business owner IS the business. The owner holds all the relationships with customers, vendors, and employees and cannot be easily replaced. In this situation not only would a buyer severely discount the price, they might not buy at all.
- The business is not cash positive. If the business is not set-up to show positive cash flow it will have a low probability of selling. Buyers do not want to buy your “stuff”. Your assets don’t pay their bills and send their kids to college, your cash flow does.
- The seller’s expectations of sale are not in line with reality. What if you’re ready to retire and you suddenly find out the nest egg for your retirement is worth half of what you expected. Would you have planned differently? Would you have drawn more money from the business earlier into a tax deferred account?
The process starts with strategic planning and continues through to the sale. The sales stage might be the final step in the process, but it too is a process.
The sales process looks like this:
- The business first must be valued to determine a reasonable selling price. An asking price not supported by the assets and cash flow available for sale will result in the business sitting on the market and rotting.
- Marketing packages must be prepared to confidentially market the business for sale to prospective buyers.
- Buyers? How will they be located? How will they be approached? A qualified business broker or intermediary is a great starting point but there is not a ready and active market for your business to be sold. You cannot go online and click a button to sell your shares. It must be created from scratch.
- Once a buyer is found there will be an exchange of information and several rounds of negotiations before a deal is reached and a transaction finalized.
All this takes time. Engage qualified professionals to help you plan for a sale well in advance of the sale itself. It’s a process. It takes time. START NOW!
