Smart People Make Dumb Decisions When It Comes Time to Sell Their Business

When it comes to making decisions about their own business, some of the smartest leaders and best business people make the dumbest decisions, especially when it comes to selling.

Today’s post is by Terry Monroe, author of Selling With Certainty (CLICK HERE to get your copy).

I am shocked by how many successful entrepreneurs—smart folks who’ve devoted years to building their businesses—can be so casual and sometimes downright dumb when it comes time to sell their businesses. Regardless how successful someone may be, and I am talking about business owners who are making $5MM, $10MM, $15MM a year in net income, they are undermining and underselling when putting their businesses on the market.

I believe part of the reason people behave in this manner is they think because they have sold things in the past such as vehicles, buildings, houses, or maybe even one time a business, they can sell what may be the largest financial asset they own, which is their business, by themselves. And armed with this uneducated self-confidence they proceed in attempting to sell what is basically their retirement account, themselves, and wonder why things didn’t work out. Either they are not finding the right buyer or are getting so frustrated they end up abandoning the sales process and continue to run the business.

My goal is to help educate as many business owners as I can on how to determine if you are ready to sell your business and, if so, what steps need to be taken and how the process works.

One of the most common mistakes is that people don’t know what they are selling. In other words, they know the operational part of their business very well, but they don’t know that the business is worth. So how can you sell something if you don’t know what it is worth? If you were selling a car you have what they call a Blue Book that will give you valuations of used car values. If you were selling your house you would look at what the other houses in the neighborhood were selling for at a per square foot price plus amenities. But when it comes to selling a business things are different, because a business is a living, breathing, and constantly changing entity. It has employees, customers, vendors, market share, industry specifics and more. A business is either going forward or backwards. It never stays the same. We like to say it is like trying to get your hands around Jell-O. So, if you don’t know what the business is worth there is a good chance that you will either over price the business, which means it won’t sell or underprice the business and it sells, and you leave lots of money on the table.

But wait it gets worse. There is a process when it comes to selling a business and it takes a certain team of players who need to be involved in order to have a successful sale. You will need a good transactional attorney (not your golfing buddy) a good tax accountant (just because your accountant has done your books for twenty years doesn’t make them good at taxes), and an investment banker depending on the size of your business or a business broker who is knowledgeable in your industry.

A true leader in today’s business world knows they need information in order to be successful. They know they don’t make any money on their ego and they are focused on getting the highest return on investment for themselves and their family on what is most of the time the largest financial asset they own their business. A true leader will take the time, do the research, do their due diligence, and won’t go into a deal blindly. They have a good understanding of what to expect and how not to get blindsided from things they should have known were going to happen.

As a leader and business owner your goal is to get the correct information and then make a decision if you want to proceed. If you surround yourself with the right team of players who can help, you go out as a winner.

Terry Monroe is the author of Selling with Certainty: Straightforward Advice For Cashing In On The Full Value Of Your Business (CLICK HERE to get your copy). He has been an owner of 40 different businesses, including 10 national franchises, a franchisor of businesses, and a retailer with more than 200 retail locations within the United States and Canada. As the founder and President of American Business Brokers & Advisors, his in-depth knowledge of business enterprising, franchising, financing, and acquisitions has resulted in the sale of over 500 businesses.

For more information, please visit www.terrymonroe.com/certainty.

Did you enjoy this post? If so, I highly encourage you to take about 30 seconds to become a regular subscriber to this blog. It’s free, fun, practical, and only a few emails a week (I promise!). SIGN UP HERE to get the thoughtLEADERS blog conveniently delivered right to your inbox!

Photo: Selling by Credit Score Geek