Selling your Business is Like Running a Marathon

Author: Craig Dickens

I have spoken previously about some staggering statistics on middle market business exit results. The numbers for small business are even more staggering. Depending on which source you look to only 1%-4% of the estimated 25,000 small businesses (under 5mm) for sale in the US are sold.

Many Entrepreneurs wake up one day and think “I want to sell”. Some have a health scare or are forced into it. Some receive the coveted letter “XYZ Acquisition Company has been retained and has a qualified client looking to buy YOUR business” (Beware!). And some are just tired and are chronologically ready.

I woke up one day and did the same with running a marathon. Who knows where these thoughts really come from, but I mused: It’s doable, yet tough, both physically and mentally. I can walk. I have two legs. I don’t even need to qualify for most of them. I boldly declared, “With a little sweat and the right attitude I can do this!”

However, success doesn’t come that easily. Even if we are part of the lucky 20% of middle market businesses to exit, often because of poor planning, and lack of a carefully and strategically consummated exit strategy (as we did with our business plan / strategy) we rarely truly maximize our proceeds upon exit.

Here are four factors that I believe pose major problems for even the most determined of entrepreneurs that, with proper awareness and planning, can be overcome:

•   The process is brutal! – Assessing, strategizing, planning, preparing, course correcting, crafting, marketing, negotiating, executing, and closing an exit is hard work. Although business owners do many of these disciplines every day in their business, the mindset, tools, and processes are unfamiliar to most owners.
•   Ownership thinking – We think, “Grow” not “Move-on”. Early in our business lifecycle we think “Grow or Die” and later on, “Grow and Sustain” then even perhaps “Grow and Maximize” for personal wealth or legacy purposes. Exit Planning, however, seems antithetical to all we have done and uses a part of our brain that is not likely to engage while simultaneously running a company.
•   Amateurs – We are not pros at exiting. Most entrepreneurs will exit only once or twice in their lifetimes and business careers. Part of what we have achieved through running a business is subject matter or industry expertise in our given field. Exiting is not our specialty, so we often neglect the discipline of exit planning as it’s something outside our comfort level.
•   Timing the Market – Listening to the media or timing macroeconomic cycles that we can’t control, causes further paralysis for business owners.

These factors keep many business owners stuck without a firm decision to form a winning exit strategy. We procrastinate, however, at our own peril.

I was ill prepared for my first marathon (my longest run was 15 miles). After hobbling across the line, totally spent and missing my goal significantly, I learned my lesson and made sure that the next time, I would have a plan and stick to it. I was prepared however for my second race. The last three miles to the finish line were still tough, but having a plan and being 100% prepared for the mental and physical rigors made the journey that much sweeter.

Selling your business is like a marathon…You may wake up one day and decide you want to do it, but having a plan makes it all the more worth doing.

The next questions an Entrepreneur must ask are:

1. Am I mentally and financially prepared to live a life without my company as part of my identity?
2. Am I financially prepared to maintain my lifestyle and meet my retirement goals by selling my company?

As we will see, having a plan to maximize value is only part of the readiness equation.

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