Why Can’t Business Owners Sell Their Companies?

 

So, you’re a business owner. You’ve worked hard to build your business and you’re thinking about selling your company. Well, you may be in for a surprise. According to a recent study conducted by the Exit Planning Institute, only 20-30% of businesses that go to market end up selling.

 

That means that the majority of privately-owned businesses in the U.S. – upwards of 80% of companies that are put up for sale – do not get sold.

 

Why is this? Potential buyers do not see the same value as the seller. Unfortunately, there’s no one to blame but the business owners. Where they fall short is that they have not properly prepared their businesses for sale.

 

Imagine that you’re selling your house. The first order of business is to get the property ready for sale. That typically means, first, having your home inspected by a licensed professional.  Next, you need to fix any issues found during the inspection so it’s in the best possible condition for sale. The third step is to “stage” your house to make it more attractive to potential buyers and to let them know all the features of your house. These three steps ensure that you’re in the best possible position to be able to sell your house and to get top price for the property when it’s sold.

 

Similarly, there are three steps in successfully preparing to sell a business:

 

1.     Perform an Assessment of the Company - The first step is to have a business valuation done to understand what the company is worth. Along with this financial valuation, you should conduct an assessment of your company’s intangible assets. The intangible assets include the company’s strategic capital, human capital, intellectual capital and social/relationship capital. These are the true drivers of business performance, competitive advantage and ultimately, of value.

 

2.     Remediate the Company’s Assets - The second step is to remediate both the tangible and intangible assets that need fixing. Maybe the assessment found cultural problems that are affecting performance or impeding innovation. Likewise, there may be intellectual capital issues that are limiting performance. These need to be addressed prior to sale in order to show your company in the best possible light.

 

3.     Communicate Features of the Company - The final step is to “stage” your company – to let potential buyers know about those factors that give your business staying power and that drive your competitive advantage. Let your stakeholders know about the intangibles that make you different – and better than other companies.

 

The tangible assets documented during the valuation process will be fairly obvious to potential buyers; but, don’t neglect those intangible factors that really make your business run. Factors such as a well-trained, productive workforce, and a strong competitive position fostered by innovation and thought leadership are your company’s real value drivers. Business owners should be focused and proactive about communicating these intangible assets to prospective suitors.

 

By following these three simple steps…

 

ü  assess

ü  remediate

ü  communicate

 

…business owners will be in the best position to know what their companies are truly worth and how best to attract and land potential buyers.

 

Saltare Solutions, LLC drives business growth by enhancing the value of a company's intangible assets. With up to 85% of today’s business value derived from intangible assets, Saltare helps business leaders recognize, capture, and communicate these assets to understand the true value of their companies.