3 New Year's resolutions for business owners looking to sell

If you own your own business and you're considering selling your business this year you aren’t alone. Four million Baby Boomers (ages 56-74) currently own businesses in the US. Most understand that the time for their exit is approaching. About 80% expect to sell their business within the next 10 years. Of those business owners, about 2/3 expect most of their retirement funds to come from the proceeds of that sale. And yet, only about one in five businesses listed for sale ever close.

The business sale process is often hard, and it looks even harder to those unfamiliar with it. I find that most owners who successfully sell their businesses resolve three issues before they begin the sale process. Before you try to sell your business, make these three New Year's resolutions for 2021.

Resolution #1: Know how much money you will need to have the life you want

Can you define enough? What kind of life do you want for yourself and your family after the business sells? How much will you need to have in your personal accounts to achieve that? It's critical that you know. Most mergers and acquisition intermediaries have a bitter story of working hard to get a deal near closing only to have the owner kill the deal when he or she realized that the net proceeds wouldn’t be enough to provide the life they want. By knowing your number ahead of time, you can determine whether the likely sale proceeds will support your goals and if not, how much additional value you will need to create in your business to reach your target.

This is a good time to engage with your financial planner or wealth manager. Your planner knows you and knows how to develop a solid plan for your future. With your planner’s help, you can fulfill your first resolution.

Resolution #2: Know enough about the sale process to manage the sale.

As a successful business owner, you have learned how to be “knowledgeable enough” to effectively manage areas of your company that are outside your expertise. If you’re say, a manufacturing expert, you bring value to the company by applying your manufacturing expertise. But you have learned enough to understand the basics of other areas of the business such as accounting, IT, HR, sales and distribution. You’ve learned to be informed while not being directly involved. You will want to do the same with the business sale process. You'll want to understand at a high level what’s going on during the business sale.

To get the knowledge you need, take two steps. First, get educated. You can find a lot of great information about the business sale process. My company, B2B CFO? recommends that you read Jerry Mills’ The Exit Strategy Handbook. Jerry writes for the business owner and the book lays out an effective way to approach the sale process along with specific steps an owner can take to prepare the business for sale. Also, if you get a chance to attend a session of B2B CFO’s seminar, “The Business Sale Solution”, go. In 90 minutes, you’ll learn much of what you’ll need to know to get your sale headed in the right direction.

Finally, meet with a business sale advisor. The business sale is a specialty all its own. Solid advice is solid gold. Yes, advisors cost money but an owner who tries to go it alone can “lose millions by saving thousands.” Most advisors do not charge for an initial meeting. Many of the best advisors hold a Certified Mergers and Acquisitions Advisor (CM&AA) designation. They have gone through rigorous training in all areas of the business sale process. You can find a directory of these professionals at the Alliance of Mergers & Acquisitions Advisors website.

Resolution #3: Know what, besides money, you want to accomplish through the sale.

Money matters. A lot. But most business owners have non-financial goals they want to achieve through the sale. Often owners want to make sure that the new owners take care of managers and employees after the sale. An owner might want to make sure that the business stays in the community, or that it maintains its brand name. All these factors and many more matter to some owners. It’s important for intermediaries negotiating on your behalf to know about your wishes so that they don’t waste time reaching an agreement you won’t approve. Don’t assume others know your wishes. Resolve to know what you want and to let those who represent you know.

The Take Away

The first of Steven Covey’s 7 Habits of Highly Successful People is “Start with the end in mind.” Once the sale process begins, you will find it easy to lose the big picture in the mass of details. Knowing the big picture ahead of time, what you want and what you need, will give you a solid basis for the sale of your business. Take the time. Do it right. Resolve to know what you need to know in 2021. You’ll be glad you did.

Jeff Mann, CM&AA, is a Partner with B2B CFO? in Fort Wayne Indiana, helping business owners in Northeast Indiana and Northwest Ohio to grow, manage, and sell their businesses. You can contact him at [email protected] or check out his website.