{"id":7031,"date":"2018-08-05T07:36:59","date_gmt":"2018-08-05T11:36:59","guid":{"rendered":"https:\/\/kerryhannon.com\/?p=7031"},"modified":"2018-08-05T07:38:14","modified_gmt":"2018-08-05T11:38:14","slug":"how-to-prepare-to-sell-your-business","status":"publish","type":"post","link":"https:\/\/kerryhannon.com\/?p=7031","title":{"rendered":"How to Prepare to Sell Your Business"},"content":{"rendered":"\n\n\n
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\"\"<\/a>A friend of mine, Wendy Volhard, recently sold her pet food business,\u00a0<\/span>Volhard Dog Nutrition<\/a>. Since I\u2019ve been writing about entrepreneurship for women over 50 lately, the passing of Volhard\u2019s baton got me thinking about the question of how women should prepare to sell a business.<\/span><\/p>\n

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And that led me to speak with\u00a0Matt Hansen<\/a>, a Certified Financial Planner and exit planning adviser with UBS Financial Services Inc., based in San Diego, to get his advice for boomer and Gen X women looking to sell their businesses in the next few years (you\u2019ll see my interview with him below).<\/p>\n

Read on Forbes<\/a><\/strong><\/p>\n

Volhard, a renowned dog trainer and author, developed the recipe for her natural dehydrated dog food 40 years ago. Its creation and success has been her legacy. (In full disclosure, my Labrador retriever, Zena, dines on it daily.) I haven\u2019t spoken to my friend since the sale, but knowing her, I imagine it was an emotional, if practical decision. She\u2019s now in her mid-70s and her husband, Jack, who was also an expert in dog training and author, died about a year and a half ago after a long illness.<\/p>\n

Often, entrepreneurs like Volhard see their business as their identity, their passion, their contribution to the world. Stepping away can be wrenching. But if done properly, it can be financially rewarding and, yes, liberating.<\/p>\n

For many entrepreneurs, \u201cthe business\u00a0is<\/em>\u00a0their retirement plan,\u201d David Deeds, the Schulze Professor of Entrepreneurship at the University of St. Thomas in Minneapolis, told me when I interviewed him for a\u00a0column<\/a>\u00a0on retirement plans for small business owners. \u201cThe plan is that when they retire, they are either going to transfer the business to a family member in exchange for a share of future wealth or a buyout or they are going to sell it off and turn that into cash.\u201d<\/p><\/blockquote>\n

Possibly the Most Financial Decision for Your Future<\/h3>\n

In other words, if you\u2019re a business owner, it may be the most important financial decision you\u2019ll make to assure that your future is financially secure.<\/p>\n

A recent Investor Watch\u00a0report<\/a>\u00a0\u201cWho\u2019s the boss?\u201d by UBS Financial Services found that 41 percent of business owners expect to exit their business in the next five years. Many are at, or approaching, traditional retirement age and ready to start a new chapter in their lives. Some simply believe current economic conditions will boost their chances of selling at a favorable price.<\/p>\n

Trouble is, many small business owners don\u2019t take essential steps to get their companies ready for sale. According to the UBS report, 58 percent of owners have never had their business appraised and 48 percent have no formal exit strategy in place.<\/p>\n

Advice from Exit Planning Adviser Matt Hansen<\/h3>\n

Here\u2019s what Hansen recommends:<\/p>\n

Next Avenue: Is there a preferred path that\u00a0women business owners<\/a>\u00a0you have worked with take for selling their companies?<\/strong><\/p>\n

Matt Hansen:<\/strong>\u00a0No one way seems to be best. Some women want to transition out of their business right away, others want to phase out over time or\u00a0transition it to key executives<\/a>\u00a0or their second generation.<\/p>\n

It depends on your goals and what makes sense for you.<\/p>\n

I recommend giving yourself at least two years and preferably a five-year time frame to make a plan.<\/p>\n

So many business owners, both men and women, believe they can sell in a year or less, but we run into a lot of obstacles based on what I call the \u2018state of owner readiness.\u2019 The more planning you have done ahead of time, the greater control you can have on the sale process.<\/p>\n

The key is to get out what you\u2019re expecting \u2014 it\u2019s common to think your business is worth more than it is \u2014 and be happy with the transition or business sale.<\/p>\n

What\u2019s your strategy for putting an exit plan together?<\/strong><\/p>\n

Our exit planning strategy is in three stages: discovery, prepare and decide. You need to assess not just the business itself, but your own personal goals and future financial picture. Most small business owners have 80 to 90 percent of their assets tied up in their business.<\/p>\n

For the formal evaluation of the value of the business, you can determine what you might expect to sell your business for from comparable sales in the industry and in your geographic location,<\/p>\n

By doing a deep analysis of the business, we can determine if anything is holding the company back from maximizing the most value upon its sale. What\u2019s out there that could reduce the potential sales price and what are the ways we can fix those?<\/p>\n

Do you have too few customers? Are 80 percent of your revenues, for instance, generated by one or two buyers? If so, that poses a risk. We want to make business owners diversify their customer base and spread out the risk.<\/p>\n

We dig through all the positives and negatives of the company and try to fix things, so the sale is more in line with the business owner\u2019s expectations.<\/p>\n

Family issues might also work against a buyer if there are relatives working with you in management positions who might not stay after a sale or not be as happy working there.<\/p>\n

When we get to the decide phase, we have found that about half of owners usually want to sell, about 20 percent want to leave it to family and about 18 percent want to close the business entirely.<\/p>\n

What are some roadblocks for\u00a0women owners<\/a>\u00a0planning to sell their businesses?<\/strong><\/p>\n

The fear of giving up what you\u2019ve worked so hard on, and your identity. We see that with both men and women to tell you the truth.<\/p>\n

You\u2019ve created a business from nothing and built it up over 20 or 30 years. It really becomes your identity. And it\u2019s your standing in the community. Women especially are concerned with how that company will continue to grow when it\u2019s sold and if it will provide a positive impact to the community.<\/p>\n

I had a client who built up a successful education business selling toys for toddlers, sold it and walked away. The company that took it over wasn\u2019t doing a really good job, in her view. She had the ability to buy the company back a few years later and then rebuilt the company to three times what it was. Then she sold it off again, but she made absolutely sure that the new owners taking over saw eye-to-eye with her. And then she fully retired.<\/p>\n

I know this sounds stereotypical, but are women business owners more emotional about letting go than men?<\/strong><\/p>\n

Not necessarily. Everyone has to do some serious soul searching. You have to ask: What am I going to do with myself after I sell my business and retire? I have spent my entire life dedicated to creating this legacy. Can I really walk away and move to the third stage of my life?<\/p>\n

What if a business owner\u2019s goal is to keep it in the family and pass it on to one of their children?<\/strong><\/p>\n

If you\u2019re looking to transition to the second generation, you want to make sure the kids have the same vision toward growing that business as you did and be really positive they really are interested. While more than half of business owners\u2019 adult children work for the business full- or part-time, few are interested in assuming ownership, according to the UBS report.<\/p>\n

In fact, 82 percent of heirs would rather have money from the sale of the business than to inherit the business.<\/p>\n

Among owners who are planning to give the business to family members, the top concerns include the future direction of the business, the successors\u2019 ability to manage the business and the potential for strain on family relationships.<\/p>\n

The UBS report found that 75 percent of business owners are unhappy with the process of selling their business. Why is that?<\/strong><\/p>\n

It\u2019s because they haven\u2019t taken the time to really think about, and discuss, what is going to happen next. Most owners are unhappy because they didn\u2019t fully understand what it was going to be like not going to work every day doing what they\u2019ve have done for the prior 30 years.<\/p>\n

One final tip: Find a career or retirement coach to work with. This is a stressful time from a professional and personal perspective. It\u2019s not all about the money. You need someone who can be unbiased and guide you through some of the big soulful questions and help you focus on staying open for what possibilities might lay ahead.<\/p>\n

It\u2019s not an ending. It\u2019s a beginning.<\/p>\n

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Part of the\u00a0AMERICA\u2019S ENTREPRENEURS SPECIAL REPORT<\/a><\/strong><\/p>\n

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By\u00a0Kerry Hannon ,\u00a0<\/a><\/span>Entrepreneurship and Personal Finance Expert\u00a0<\/span><\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n<\/div>\n<\/div>\n

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Kerry Hannon has covered personal finance, retirement and careers for The New York Times, Forbes, Money, U.S. News & World Report and USA Today, among other publications. She is the author of a dozen books including\u00a0<\/span>Money Confidence: Really Smart Financial Moves for Newly Single Women<\/em><\/a>,\u00a0\u00a0<\/span>Great Jobs for Everyone 50+: Finding Work That Keeps You Happy<\/em>\u00a0and Healthy…and Pays the Bills<\/em><\/a>,\u00a0<\/span>Getting the Job You Want After 50<\/a>,<\/em>\u00a0<\/span>Love Your Job: The New Rules for Career Happiness\u00a0<\/a><\/em>and\u00a0<\/span>What’s Next? Finding Your Passion and Your Dream Job in Your Forties, Fifties and Beyond<\/em><\/a>. Her website is\u00a0<\/span>kerryhannon.com<\/a>. Follow her on Twitter\u00a0<\/span>@kerryhannon<\/a>.<\/span><\/div>\n<\/div>\n<\/div>\n<\/div>\n

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