Michelle Seiler-Tucker, author of Sell Your Business for More Than It's Worth, says she's not your typical business broker. For one thing, if you ask her to sell your company when you're under the gun--getting a divorce, arguing with your partner, relocating, or losing money--she'll counsel you to think long and hard before you do. That's because the best time to sell your business is when it's doing well, not when you're suffering from a catastrophic event.
Not only that, but eight out of 10 businesses will not sell, a disturbing statistic when you consider the millions of baby boomers who will be planning exit strategies in the near future. "This is a huge problem facing our society and our economy because you're going to have a lot of these business owners shut down and you're going to have employees lose jobs," she says.
If you want to sell your business, but know it's not worth what you need to move onto the next thing Seiler-Tucker says you need to "hold and grow then sell and go." Here's how she says you can do it.
Stop the bleeding.
She points to a client who operated his company out of his home with his wife and one employee. The couple was working 12 to 16 hours a day, completely burned out and turning away thousands of customers a year because they couldn't keep up with demand for their product. Seiler-Tucker determined that after selling their company and paying off debt the couple wouldn't have enough money left over to invest in another venture or retire. In short, the client who had been self-employed for decades would have to go to work for someone else, a prospect he despised.
Seiler-Tucker analyzed three aspects of the company to figure out how to grow its value: People, product and process. "We hired seven people right away," she says. "He has an outstanding product so we didn't really need to tweak or fix that."
What was broken: The process, which needed more people to carry out and in a larger space. As a result, the company moved into a 5,500-square-foot building and in 90 days grew orders five-fold.
Flesh out your plan.
If you're a $500,000 company today, but you want to sell in five years for $5 million, you need to reverse engineer your goal to figure out how to get there. This involves identifying the type of buyer you want to lure and the kinds of things that person will be looking for in terms of cash flow, profit, assets and anything else that shows up on a balance sheet.
Identify the "why" that will motivate you to get there.
Pinpoint the important motivations for reaching your selling valuation because growing a company is hard work. >>>