By Mark Tepper
Ironically, the same traits that drove you and your business to success can also lead to missteps when time comes for you to sell the biz. The biggest culprit may well be your own eternal optimism. While a positive outlook on your business‘s valuation spurred growth, viewing details of your sale through that lens can devastate your exit deal.
Here are common misconceptions.
Your perfect buyer is one call away. Entrepreneurs work extremely hard for success. After building a valuable company, you may find it hard to believe countless buyers aren’t eager to purchase your business.
Unfortunately, nearly 80% or more of businesses won’t sell — ever. Reasons vary from lack of profit and declining sales, an inflated asking price, over-involvement of you the owner, unfamiliarity with the market, your over-valuing your own sweat equity or financial representations that can’t be substantiated.
If you intend to sell your business one day, take necessary steps early to make this a reality.
You run a billion-dollar enterprise. If you’re like a lot of entrepreneurs, you believe you’ll sell for four or five times EBITDA (earnings before interest, taxes, depreciation and amortization). This rarely happens.
To keep expectations in line, research average sale prices in markets of similar companies. Don’t assume that another company’s selling formula (sometimes a multiple of assets, profitability, market share, customer demographics and other factors) will work for you — no matter how alike your two respective companies seem. Multiples also sometimes depend on the number of employees in your company.
You and your biz are unstoppable. If you built a successful business, you probably overcame your fair share of challenges.
That does not make your business immune to error, economic conditions or changing customer demographics, though.
Be proud of what you accomplished as an entrepreneur — but also don’t mistake self-assuredness for indestructibility. Remain aggressive and competitive at all times; know your strengths and understand your weaknesses to make your company stronger before (and even during) its sale.