When selling your business, it might not always be your ideal deal, but it's often a much better option than simply walking away. This is especially true if you, as the owner, remain the most crucial employee and will need to be replaced by the new buyer. One key factor to consider is that such transactions involve higher risk due to customer retention concerns.

Because of this, buyers might hesitate to pay a premium or might ask for what's known as "skin in the game," which refers to seller financing.

I'd also categorize businesses generating between $150,000 to $300,000 in seller's earnings as falling into this higher risk category. Owners might find it challenging to step away and prepare for a sale in these cases. The question arises: Does the seller prioritize the money over the idea of selling?

Preparation for the sale is critical for any business. It's more involved than simply receiving a valuation from your CPA with terms set in stone. Is it entirely non-negotiable and an all-cash deal? The process is actually more intricate. While advisors in the business world may prefer those straightforward transactions, they might only constitute about 20% of all sales.

If you're seriously considering selling, it's wise to engage an experienced advisor as your guide. This advisor can help you explore various options, gather market data on similar companies that have been sold or listed, and analyze how your company compares to the competition in terms of key data. This step involves market analysis. Additionally, you need to evaluate your own organization and determine the best type of buyer—whether an individual or a strategic entity. You also need to assess your level of preparedness for the sale. Remember, the better your preparation, the more favorable the outcome is likely to be.

For a complimentary consultation, feel free to email us. The current timing presents a favorable window for the next 1 to 2 years. During the selling process, it's essential for the owner to become the least pivotal person in the business.

Building your succession team is a gradual process that involves assembling a management team capable of driving your company in your absence or through a transition. What are the crucial skills to prioritize? They should possess qualities such as stamina, drive, compassion, and the ability to handle pressure while making sound business decisions. When putting together your key team members, it's essential to assess their abilities thoroughly. Did you genuinely test their skills, or were they merely obedient followers of your lead?

Consider a recent conversation I had with a relative of a business owner seeking assistance with a transition. This Service Business had 4 employees and the owner, generating around $1 million in sales and providing $150,000 in owner's earnings. The business seemed solid, but it had a critical flaw. Only the owner had the customer relationships; a key employee who had been groomed for this role left for better opportunities. This departure might have been due to the owner's delay in passing on this responsibility. Faced with disappointment and a lack of energy for daily operations, the idea of selling emerged as the next misguided step.

While exploring options, two potential paths emerged: selling to a local competitor or a newcomer in the market, or finding an individual keen on ownership. Both avenues, however, require the owner to remain until the trust of the clients is successfully transferred to the new owner—a process that could take some time.

At this juncture, deals of this nature often stall. The owner's desire for a premium price and compensation during the transfer period can lead to collapse due to the new owner's potential financing risks.

So, what's the next best option? Rebuilding another key individual or selling at a discount? An advisor cannot perform miracles, but they can steer you toward the best possible outcome. You might not always appreciate their advice, but it could be a superior choice to walking away burned out in five years.

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