Business Owners Too Often Rob Themselves Of A Great Exit To Their Next Chapter

Business Owners Too Often Rob Themselves Of A Great Exit To Their Next Chapter

The best business exit advice I’ve ever heard from a small business owner after a successful exit and while enjoying their retirement years:

“When it’s time to sell, it’s time to sell. It’s not worth digging in and insisting on a valuation that no one else agrees with or that’s not realistic. You’ll stress yourself out, lose valuable time, and possibly never sell it. Find a great local small business broker, go to market confidentially, get what you can for it, and get out!”

To elaborate, I’ve seen way too many small business owners get in their own way when it comes time to sell. They’ve either waited too long, have a valuation expectation that is unrealistic, don’t have their financials in order, or all the above. And sadly, the result is always the same: months or years of wasted effort, frustration, and a declining business that never sells.

The root problem is simple. Owners become emotionally attached to the story they tell themselves about their company. They remember the long hours, the risks they took, the customers they rescued, and the personal sacrifices. In their mind, those years of blood and sweat should translate directly into a higher sale price. When a broker or valuation expert presents a realistic range based on actual comparable transactions, earnings multiples, and risk factors, the owner often rejects it out of hand. “That’s way too low,” they say. “My business is different.”

The market, however, is not emotional. Buyers look at Seller’s Discretionary Earnings or EBITDA, apply a multiple that reflects risk and growth prospects, and decide whether the return justifies the investment. They respect and appreciate what the owner has built, but do not financially calculate or compensate for the owner’s memories or the owner’s belief that the business “should” be worth more. When an owner ignores this reality, the deal pipeline dries up. Offers that do come in are perceived low, contingent, or structured in ways the owner finds insulting. Negotiations stall. Buyers lose interest. The business sits on the market longer, which itself can become a red flag to the next group of buyer prospects.

Oh, and “that one buyer” that’s been telling the owner they’re interested in purchasing the business, but they just need more time? It rarely, if ever, materializes. They aren’t serious, they don’t have the money, or both.

The cost of all of this is high. Opportunity cost compounds. A realistic price accepted today, invested or deployed elsewhere, often outperforms a fantasy price that never

materializes. And of course, time is the most obvious and costly loss. Every month a business remains unsold is another month the owner remains tied to it, unable to move on to the next chapter. And time with our loved ones and doing the things we most enjoy? Well, that’s our most valuable resource.

I’ll end with reemphasizing what our business owner quoted above: find a great local small business broker, get a valuation estimate, accept the results. go to market confidentially, find your exit, and enjoy your next chapter! This is the way.

Originally published by the Goering Center for Family and Private Business in partnership with the Cincinnati Business Courier.

Read the original article here.