By Eric Reich
Recently I wrote an article on where to turn to help sell your business. Over the years, I have counseled many business owners regarding the sale of their business. Over that time, I have found that there are many times that the owner should not sell their business at that point in time. Suggesting you not sell may seem counterintuitive, after all, the point is to have an exit strategy someday and go back to a “normal life” as I call it. Having that liquidity event is what many business owners rely on to fund their retirement. I think it is important for every business owner to go through the exercise of what a potential sale might look like, but I don’t think everyone should actually go through with the sale itself, at least not yet. Here are some reasons not to sell your business.
1. Your business isn’t ready. Successful sales happen because the business can readily be taken over by a potential buyer. This means
Others can easily replicate systems and processes of the business. The less time it takes to transition your company the more it is potentially worth to a buyer. Not having these areas well-established means your business might not be ready to sell.
Staff not being ready either. A sale might be contingent upon your staff remaining with the company and making the transition easy for them can be just as important as the business itself.
Is your business growing? Buyers want to see a year-over-year pattern of growth, and stagnation will reduce the value of a potential sale.
Are your costs under control? Even growing companies need to manage their costs to be ready for a sale.
2. You aren’t ready. This is the one that trips up most owners. They may think they are ready to sell, but when the time comes to actually let go, they simply aren’t ready to do that. Having something to retire to can help a lot with this part. Knowing how you are going to spend your new free time and having an idea of what a typical day might look like can really help you be mentally ready to let go. You’ll need a purpose beyond your business to retire to.
3. You have no buyer or successor lined up. You need to know who would potentially buy your business. Would it be someone on the outside or an internal successor? If you want the sale to be internal, can the employees afford to buy it when you are ready? Putting a mechanism in place for them now to buy it someday can help ensure they can afford to buy it when you are ready to sell. Knowing who would buy your business in the future even if you have no intention of selling it can make a huge difference in both your future sale value and your peace of mind.
Going through the steps to prepare for a sale is important to give an owner insight into what a future sale might look like. Remember, not all sales happen because the owner wants them to. Some sales happen out of necessity and some of those are due to urgent circumstances. Protecting your business’s value by being prepared to sell even if you don’t intend to can help smooth out the chaos of an unplanned sale. I have been through the process of business sale as both a buyer and a seller. One thing I can definitively tell you is that it takes much longer than you think, and your business probably isn’t worth as much as you think. If you go into the process with an open mind about whether or not now is the right time to sell, you’ll save yourself a lot of time and aggravation when you really are ready.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a
Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations. A lifelong resident of Cape May County, Eric resides in Seaville, NJ with his wife Chrissy and their sons ,CJ and Cooper, and daughter Riley.
