Most Businesses Never Sell
87% of businesses in the United States never sell. What happens to them? Instead of a “Sold” sign, they place a “Going Out of Business” sign in their windows. This does not just have an impact on the owners but on countless other stakeholders: employees and their families, customers, vendors, partners, and communities. But why does this happen? Is it simply because they are not good businesses and not worth anything? No!
The reason most businesses never sell is of lack of preparation and defined exit options. Over 95% of all businesses that approach business brokers have a short timeline to sell — 3 months, 6 months, 1 year. Many business owners put off the important matter of designing a plan to sell, in favor of other urgent matters in their business.
Why Should I Prep to Sell?
Many of our clients never plan to sell their business. Selling is Plan B. Plan A was leaving it to their kids, selling it to key employees. But Plan A didn’t work. Unknown to many of our family and employees we are not just entrepreneurial heroes…. We are (shock) real people, with real people problems, real people opportunities, and even real people life crises. Almost all business owners sell because they have a personal issue or opportunity in their life that forces the sale; not because it was the plan. Personal reasons like: relocation opportunities, retirement dreams or even illness.
Life is unpredictable and uncontrollable. I know some of us have thought, “I’m never going to sell my business.” But we don’t get to make that decision. All of us will leave our business, either by walking through the front door head held high or by going feet first.
Everyone else in my profession will tell you that you will need an exit plan, there are even some companies that will charge you five figures to put together a 100-page plan in a pretty binder. I’m here to tell you, you don’t need an exit plan, you need exit options. Because like everything else in life, your plan doesn’t always work.
Defining Exit Options
So what are the options to sell your small business? Who buys these businesses? Here they are:
1. You can milk your company for all the cash its worth and close it when you are done.
This is a very viable option for some owners, and what most of that 87% choose.
2. You can sell your business to a 3rd party.
This is a broad category but involves sales to any number of business buyers including selling to private equity, companies larger than yours, or individual business buyers (this category is actually 80% of the business buying market!)
3. You can transition your business to a family member, friend or business partner.
4. You can sell your business to your key employees.
That’s it. Those are really the only exit options for small business owners. But the good news is, if you plan in advance, you can use strategies to increase the likelihood that those options come true – that the value of your business and the likelihood it will sell in those situations happens. Our program, Prep to Sell, teaches you just how to do that — design your exit options and become part of the elite 13% of business owners that are able to have the ultimate entrepreneurial accomplishment — a successful business sale.