Ok so you’ve got a good business. You’ve worked your tail off and now you know you’ve built a great business. Great. Good for you. You should be proud of yourself. Many fail and many just ‘survive’. To thrive is really hard and most businesses don’t. Statistics tell us that.
Now, for whatever reason you’ve made the call. It’s time to sell.
We sold because the timing just felt right. How did we know it felt right? Because we constantly revisit our ‘why’. Because we constantly revisit our vision for our life and in doing so, we knew that after 10 years building a great company, the time had come for a new adventure.
So if you get to this point and you seriously want to sell your business, here’s what you need to do to get the result of your dreams.
Make your revenue numbers look as good as possible – there are plenty of ways to do this. Chase every lead. Push hard and get the team incentivised to hit a few ambitious targets. Stop taking cash payments – be prepared to pay your whack of tax. You need to start doing all of these things 12 months before you prepare to put your business on the market
Make yourself obsolete and empower your team. Nobody is going to buy your business if they think everything will go to shit without you. We were lucky. Our story worked beautifully. We accepted an offer for the business at Melbourne airport. We navigated due diligence from the jungles of Costa Rica and we finalised the sale of the business from the beaches of Ibiza. It was easy to get a prospective buyer who was already excited by your business to get excited by the lifestyle it could provide – we were away travelling the world working remotely on average an hour or two a day, with no plans to return. We had a great team in our office in Melbourne running our business. Business was great and projections were awesome.
Find the right business broker
We completely screwed this up the first time round by being naive, rushing the process and not doing our homework. We lost 6 grand and were set back around 6 months.
I met with our first broker on a Monday afternoon and our business was on the market by Wednesday morning. It took around 6 weeks for us to realise that the likelihood of this guy ever selling our business was zero. He couldn’t sell it because he didn’t understand it, he didn’t know our numbers, our story, the right kind of buyer for the business – and he simply couldn’t answer any of the many questions and interested patty might ask when they contact him to enquire.
His strategy was simply to advertise and wait for the phone to ring
After that failure, we met with 6 more brokers before finally settling on the 7th. By contrast, after our first meeting, this fella spent 3 months working on preparing our business to go on the market. He was/ is a numbers man and he was on the phone to us daily with another set of his questions and by the time MPT hit the market, he knew our business and our numbers better than we knew them ourselves.
His approach was very different. He certainly wasn’t against advertising and he advertised in all the same places that broker 1 advertised. but, his core strategy was to understand a business better than the owners understand it themselves, then to draw up a comprehensive and creative list of every possible business that may want to buy it and contact them one by one.
His philosophy was that you just never know where a buyer is going to come from and you just can’t predict the motivations of a buyer. You sell good businesses by knowing exactly why they are good, then getting out there and finding a buyer – not sitting in your office waiting for the phone to ring.
As if to prove the above, our buyer didn’t come from an ad or from any business on that list – our buyer came via an enquiry for a completely different business that this broker had on his books. He felt that the fit was right, he pitched it to them and the rest is history
Draw up a list of potential buyers
This is YOUR job, not your brokers. Yes, he or she’ll be compiling their own list (if they’re any good) but – i’ll guarantee you that your list will be longer, more creative and more full of potential. The lesson here – get involved – it’s a team effort selling your business and your input is absolutely critical.
Sell a dream. Don’t let anybody tell you that a business is bought and sold off a spreadsheet. No. You need to sell a vision and create a narrative about where the business is going and what life will be like holding the reign of this business. It is not a case of taking a few years financials and applying a formula specific to industry. This is what a buyer will aim to do – don’t accept that. Be truthful but be creative. You need to come up with some carefully thought out, carefully researched and compelling reasons why your business is worth more than it appears to be worth on paper.
Don’t fudge the facts. You’ll be tempted to… and you might get away once or twice with something in that grey area or something that is ‘open to interpretation’ if you can explain it away for the most part.
But any more than once or twice and a prospective buyer is going to start losing interest. They’re going to start thinking ‘what else are they hiding’ and they’ll go cold. If they don’t ask, i would suggest don’t tell – BUT i strongly recommend being completely open and honest in the due diligence phase. Be prepared, well researched and in a position to argue a point robustly in due diligence if you believe that a buyer is being unjustly negative about a part of your business.
Reduce expenses – We had one big ‘plug the leaks’ campaign 12 months before we sold and everyone in the company got involved. Our staff were requested over a one month period to take a forensic look at EVERY part of their job and ensure that: all costs were absolutely necessary and that there wasn’t a more cost effective/smarter way of doing things. They were asked to report back at the end of the month in our weekly meeting. We also cancelled any unnecessary memberships, we put the new brochure on hold, we held off on that new hire, that new touring vehicle, and we shelved our tentative plans for a bigger office space.the results were remarkable and added notable value to our business.
Hope this helps!
More information: https://thesunshinetribe.com/