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\n\t\tOpinions expressed by Entrepreneur contributors are their own.\t<\/p>\n
If you\u2019re having trouble exiting your company, you\u2019re far from alone. According to the Exit Planning Institute\u2019s latest report<\/a>, up to 80% of businesses on the market never sell. You may start to question if there\u2019s something wrong with it. It\u2019s almost never too late to fix the problems causing your stalled sale; most of your issues can probably be fixed with a detailed view of what\u2019s going on.\u00a0\u00a0<\/p>\n So, if you think you\u2019ve done all you can to prepare but you\u2019re not getting any bites on your asking price, it\u2019s time for a second look at your operation to be sure you aren\u2019t making these three big mistakes:\u00a0<\/p>\n Many businesses languish on the sale block because their owners\u2019 expectations are misaligned with the market. An owner will come in and say they want to sell for $1 million, and when the valuation comes in at a fraction of that, they decide they\u2019d rather shut down than take less money. It happens a lot, unfortunately.\u00a0\u00a0<\/p>\n If you\u2019ve spent your life building your enterprise and it has enabled you to support your family, it\u2019s understandable that you might overvalue it. As far as you\u2019re concerned, no price is high enough to compensate you for all the sweat equity you\u2019ve poured into your company.\u00a0<\/p>\n But those emotional values aren\u2019t a significant factor in how valuation is calculated. Often, an owner who struggles to sell<\/a> just doesn\u2019t understand that process or how the market dynamics work.\u00a0\u00a0<\/p>\n Work with a broker or professional exit advisor who can take an objective look at your operations and give you a fair estimate of what they\u2019re worth to buyers. They should be willing to show you how they arrived at their number.\u00a0<\/p>\n This is a common problem for owners whose exit has stalled.\u00a0\u00a0<\/p>\n We worked with a retailer who had multimillion-dollar revenue from two locations; the demand was certainly there. But their overhead was so high, it cut deeply into their profits. In fact, they weren\u2019t making a single dollar in profit. Naturally, they couldn\u2019t find a buyer.\u00a0<\/p>\n When we started pre-planning, we went through their financials and found they were spending a lot of money on unnecessary and duplicate expenses, like putting two advertising professionals on staff while also paying an outside agency. And they had never raised their prices, so they were also undercharging in the market.\u00a0<\/p>\n We worked on reducing overhead, and in about five months they went back to market and sold at a profit. I can\u2019t tell you how much they got, but it was previously worth nothing, so the price was a huge bump.\u00a0<\/p>\n With so much risk in the world today, buyers just want good, stable businesses they can count on. They measure financial strength in factors like predictable cash flow from recurring revenue, rather than big but unpredictable infusions. And on the operations side, they want a solid management team that will keep things running smoothly after you\u2019ve left.\u00a0 Above all, they want to see tangible proof that you\u2019re worth the risk. So, you\u2019d better bring the receipts.\u00a0\u00a0<\/p>\n The story of your company is based on financial statements, cash flow comparisons, customer lists, inventory reports and other documentation. Make sure whoever reads your story can follow it.\u00a0<\/p>\n Recently, I was talking about this with a client who said, \u201cWe have all these government contracts and recurring revenue bases, so we should be worth more.\u201d I told him the valuation did show that, but they had to show proof that\u2019s easy to follow.\u00a0<\/p>\n Can you produce contracts showing reliable long-term income? Do your reports show recurring revenue that\u2019s been growing steadily over the last two years and what it will be worth in the future? You can\u2019t just tell somebody a good story. You have to show the data that backs it up.\u00a0\u00a0<\/p>\n It\u2019s easy to get so caught up in day-to-day operations that you fail to see weaknesses that could eliminate prospective buyers. You need to see it through the eyes of a buyer or an outside advisor. What you think is unique could be very mundane to them.\u00a0<\/p>\n It\u2019s also necessary to change your ownership mindset. You operate differently when the purpose is to earn a steady income than if you want to grow a transferable asset.\u00a0\u00a0<\/p>\n When the time comes to go on the market, work with your advisors to create and maintain clean books and records. Are you running personal expenses through the company? That\u2019s fine when you\u2019re running the place, but not when you\u2019re going to exit.\u00a0\u00a0<\/p>\n Be honest about your value, shore up the fundamentals so you can justify a good asking price and clean up your books and records to make it easy to understand your story, and you\u2019ll start attracting serious buyers again.\u00a0<\/p>\n<\/p><\/div>\n If you\u2019re having trouble exiting your company, you\u2019re far from alone. According to the Exit Planning Institute\u2019s latest report<\/a>, up to 80% of businesses on the market never sell. You may start to question if there\u2019s something wrong with it. It\u2019s almost never too late to fix the problems causing your stalled sale; most of your issues can probably be fixed with a detailed view of what\u2019s going on.\u00a0\u00a0<\/p>\n So, if you think you\u2019ve done all you can to prepare but you\u2019re not getting any bites on your asking price, it\u2019s time for a second look at your operation to be sure you aren\u2019t making these three big mistakes:\u00a0<\/p>\n Many businesses languish on the sale block because their owners\u2019 expectations are misaligned with the market. An owner will come in and say they want to sell for $1 million, and when the valuation comes in at a fraction of that, they decide they\u2019d rather shut down than take less money. It happens a lot, unfortunately.\u00a0\u00a0<\/p>\n<\/p><\/div>\n1. Clinging to unrealistic assumptions<\/strong>\u00a0<\/h2>\n
2. Ignoring the fundamentals<\/strong>\u00a0<\/h2>\n
3. Telling your story wrong<\/strong>\u00a0<\/h2>\n
Change of mindset<\/strong>\u00a0<\/h2>\n
Key Takeaways<\/h2>\n
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1. Clinging to unrealistic assumptions<\/strong>\u00a0<\/h2>\n