May 29, 2013

Many business owners do not have a plan in place to sell their business. Therefore, when it comes time to sell the business, approximately 80 percent of businesses are not salable. As a recent article explains, businesses are not salable because “they offer no strategic fit to a buyer.”

It is therefore vital for business owners to put a strategy in place that will protect the business by ensuring that, when it is time to sell, the business is salable. The author suggests crafting such a plan at least five to seven years before you plan to sell the business.

Before considering whether your business will be salable, it is important to determine what personal goals you have for your life beyond the business, and determine how the business can help you reach these goals. For example, if you determine that you need $7 million to retire, but your business is only worth $4 million, you will need to determine a way to close that gap by increasing the value of the business. Increasing the value of the business may also make it more attractive to potential buyers.

If you decide that you want to transfer the business to a key employee or family member rather than sell it outright, the buyer may not have the funds necessary to purchase the business outright. In this case, you will need to have a plan in place that will assist the new owner in determining how they will get paid from the cash flow of the business.