Everyone has days where one thing after another goes wrong and you think maybe I should just sell this thing and go do something else.
Sometimes you get into a funk where all you can think about is how great things would be if you sold the business and didn’t have to come in. Not. One. More. $%^&*@! time.
I’ve certainly been there. I’ve thought to myself that if someone offered me a fair price today I’d take the money in heartbeat. They can have the business and they’re welcome to it!
But there is a big problem with that. You can’t sell it for enough. Not nearly.
I’ve sold over 20 businesses as both an owner and as a business broker. In not one case did the business sell for enough that owner could retire and never work again. And these weren’t just micro businesses- some of them were grossing over $1 million a year- a respectable volume in anyone’s book.
The problem is a good, established, well run successful small business will only sell for between 2-3 times annual cash flow. A poor one will sell for less, if it sells at all.
After you figure the cost to sell, and taxes, you are lucky in most cases to walk away with 18 months worth of income. Unless you’ve already set aside enough to retire on, there is no way you are going to be set for life from selling your business.
The only other time it makes sense to sell is when you have a better use for the money with the same or less risk and more opportunity than what you currently have (aside from if the business is literally destroying your health, as it was in the case of one restaurant owner I helped to sell- she had lost 30 lbs. in the six months she owned the business and she was barely 100 lbs. to begin with!).
If you do sell without a plan, of course you can take a few months off, but the longer you wait, the less capital you have to do something with. And what do most people end up doing? They go back to work in the exact same business- but they have to start again from scratch, and maybe inconveniently far away if they signed a non compete agreement, as most seller do.
As a former entrepreneur, you are often hard pressed to get a job, because employers figure (rightly, for the most part) you will be hard to manage, being used to doing things you own way, and you will want to be paid more than you are likely to be offered. They also fear, if you are doing something different than your old business, that you are going to learn their business and then go out and compete with them (also a legitimate concern).
So if you can’t sell your business for enough to retire on and you don’t want to end up trying to find a job or having to start a new business in a few months after selling the old one, what should you do?
The answer is to fix the business you’ve got.
Why fix it? Why not dump it and start something else? Here’s why: you’ve already got momentum. You’ve already got cash flow coming in. It is much easier (and faster) to make some adjustments to something already moving than it is to start something moving that doesn’t even exist yet.
With a properly fixed business, you can:
- Reduce the hours you work
- Stop doing the parts you don’t like
- Generate more income
- Sell for enough you actually could retire!
The last line is true, but at that point your motivation to sell is going to be a lot lower- you aren’t burned out, you aren’t working so many hours, you aren’t doing the stuff you hate and you are making a lot more money- why sell? Just take a long vacation instead!
And then another one a few months later. That’s the kind of thing you can do with properly set up business. But it’s impossible with most small businesses the way they are usually run. Which one do you want? 🙂
The way to get to where you want is to look at why you want to sell and see what can be done to fix it.
There’s a quick way to know what is wrong and what to fix- just make a list of everything you would change about your business if you could- if you had a magic wand. Be very specific. Make the list as long as you like.
Chances are, you came up with a list that covers some of these things:
- Have to work too many hours
- Have to do everything myself if I want it done right
- Can’t seem to grow past a certain point
- Not making enough money for the effort
- Employees are a hassle to manage
- Customers are a pain in the butt
- Seems to be feast or famine with cash/sales
- No time to be planning or strategic- always putting out fires
The whole point of this exercise is to help you see where you need to transform your business so those problems don’t happen any more and you can enjoy the fun parts of your business, or invest in others, or sell for REAL money or do whatever else you like because you have the personal and financial freedom to make those decisions.
That’s why, when I’ve been tempted to sell, I have to stop and remind myself- if there are things about my business I don’t like, it’s up to me to fix them. No one else is going to do it. And it can be done. It’s not impossible, and it won’t take years. It just needs to be something you plan, commit to do and then take action to make happen. I can do it. You can do it.
Sound good? That’s what we’re aiming for- myself included. Let’s get going!