According to a survey of 493 business brokers titled “Q3 2022 IBBA and M&A Source Market Pulse” the biggest reasons for a sale process to fail is the business owners’ expectations of the value of the business, versus what the market is willing to pay. Per the survey 23% of the businesses that didn’t sell were due to unrealistic seller expectations. Often the value the business owner puts on their business is what they need, and not the fair market value. The business owner then enters a time consuming and expensive sale process which is set for failure from the outset.
One way to avoid this is to get an independent valuation of your business before going to market. If the valuation doesn’t meet your expectations, you can then either adjust your expectations, which seems a bit too much like giving up; decide not to sell; or create an Exit plan for closing the gap.
There are lots of things you can do to improve the price you will get on sale of your business, given time and a good strategy, and this is the domain of a good exit plan.
A good exit plan will take you through a process to help you determine what you need out. It will also value your business and determine what you will get out, after tax, if you were the sell. Once you know the gap it will allow you to take actions to close the gap or adjust your expectations.
A good exit plan will identify the top actions you can take to close the gap and document a plan with timelines to close. This process will take time and it is good practice to start looking at exit planning as soon as possible, to ensure your business is always ready for sale.
“Selling a business is like baking a cake. It takes time to mix the ingredients, bake it to perfection, and let it cool before serving.” – source unknown.
Should you be interested in a short no obligation consultation please feel free to contact us via our website: https://agilequity.co.za/exitplanning
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